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Can I rent out my house on a normal mortgage?

Property Saviour » Landlord » Can I rent out my house on a normal mortgage?

Moving out? Got a job to do abroad? Whatever the reason, renting your house out could be the answer to continuing to make mortgage payments.

Do you need to get a new mortgage, or can you stay on the one you’ve got? Here’s all the information you need.

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Can you rent out your house on your average, residential mortgage?

If you want to rent out your house, it depends on whether it’s a temporary or permanent basis. If it’s temporary, your lender may give you ‘consent to let’, which is permission to rent out your home for a certain amount of time on your existing residential mortgage. That’s great!

However, if you don’t get consent or you want to rent out your house permanently, you won’t be able to stay with your current mortgage. Instead, you’ll need to get a buy-to-let mortgage, which could be with your current lender or a new one.

It’s usually wise to hire a mortgage broker to compare the market to find the cheapest deal.

How does consent to let work?

Consent to let is just what it sounds like – permission to rent out your home! If your lender grants consent to let, it means they’re happy for you to rent out your house on the current mortgage. Usually, this will be for a year or until your fixed-rate mortgage comes to an end.

So, who is this for? Homeowners who need to rent their house out short-term would benefit from this.

For example, if you’re moving in with a partner but want to test the waters before selling up, consent to let will allow you to rent your house out while deciding. Or, if you want to go travelling for a few months, renting out your home can help you pay your mortgage while you’re away.

It’s a lot easier than changing to a buy-to-let mortgage and then back to residential mortgage when you return.

It does come at a cost, though. Even though residential mortgages are usually cheaper than buy-to-let mortgages, most lenders will charge a fee for consent to let.

This may be a fixed amount or higher interest rates. Some lenders may require you to pay both. Additionally, you’ll need to pay for all other costs related to becoming a landlord, such as getting a gas safety certificate, energy performance certificate, ensuring fire safety regulations are met, etc.

However, the rent you get should cover all these costs and more. It can be a great way to generate income, and you can even hire an agent to manage your property if you don’t want to. All in all, not bad!

It's usually wise to hire a mortgage broker to compare the market to find the cheapest deal.

Will I be able to get consent to let?

Do you want to rent out your place temporarily? If so, lenders will look at certain factors to decide if they will give you consent to let. Equity is the amount of your property that you own outright.

That is, how much money would go back to you instead of to the lender if you sold your home and paid off your mortgage. For some lenders, they will only give you consent to let if you have a decent amount of equity, such as 25% of your house’s value.

Income is also important. Some lenders will only give you consent if you are earning a certain amount. They also want to make sure the rental income you get from your property will cover the cost of the mortgage repayments.

Also, they may want you to have been with them for a certain amount of time, such as 12 months, before giving you consent. If you have a Help to Buy or shared ownership mortgage, you can ask the schemes for consent, but they have strict criteria.

If you don’t think you can meet the criteria for consent, don’t worry. You may still be able to rent out your house, but you would need to switch to a buy-to-let mortgage.

How does a buy-to-let mortgage work?

If you’re looking to rent out your property for a longer period of time than usual (usually over a year), you’ll need to switch to a buy-to-let mortgage. These mortgages are designed especially for people who want to make an income from their property rather than living in it.

The great thing about a buy-to-let mortgage is that you can rent your house out and get rental income for as long as you want. Who doesn’t love that?

Most buy-to-let mortgages are interest-only, which means your monthly payments only cover the interest, not the loan itself. When the mortgage term is finished, you’ll need to pay the loan back in one big lump sum.

This could sound daunting, but keep in mind that your property is an investment and you won’t be living in it! Many landlords will just remortgage and eventually sell their properties to get the money.

It’s important to note that buy-to-let mortgages are generally more expensive than residential mortgages. You’ll usually have to put down a higher deposit (think 25-40% of the property’s value!) and pay higher fees and interest rates.

However, the idea is that you’ll be making an income from your property, so it shouldn’t be too much of a problem. Make sure you can afford the monthly payments without any rental income, just in case.

How do I get a buy-to-let mortgage?

It can be more difficult to get a buy-to-let mortgage than a residential one. Your lender will do the same checks they would for a residential mortgage, like assessing your income and credit score. They’ll also check the amount of rent you’re planning to charge.

Typically, they’ll want your rental income to be at least 125% of your monthly mortgage repayments (if it’s an interest-only mortgage).

Let’s say your monthly repayments are £500. This means your tenants would need to pay at least £625 per month, so your lender can be sure your rental income will cover the repayments.

Do I have to tell my lender Im renting out my property
It's important to note that buy-to-let mortgages are generally more expensive than residential mortgages

Do I have to tell my lender I’m renting out my property?

Yes, renting out your property without getting permission from your lender first will breach the terms of your mortgage. If your lender finds out, they might demand you repay your mortgage in full right away. That could be difficult if you don’t have the funds to do so.

Additionally, your credit score may be negatively impacted, making it more challenging to get a mortgage or other loans in the future.

Can I rent out my house without telling my mortgage lender UK?

If you have a residential mortgage, it’s not allowed to rent out your property without the lender’s permission. This is considered mortgage fraud and the consequences can be serious.

If your lender discovers what you have done, they could demand that you repay the loan in full or repossess the property.

Ready to become a landlord?

If you’ve got a change of circumstances or you’re planning to become a landlord, you need to inform your mortgage lender. The best way to do this is by speaking to an independent mortgage advisor.

They’ll be able to help you decide if consent to let or buy-to-let is the best option for you. And if it’s buy-to-let, they can search the entire market to get you the best deal. What could be better?

Are you thinking of selling your property instead? Get in touch with us today to find out more!

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