The Inside Edge
If you are thinking about renting out your house then you could face an extra 1.5% of interest being added onto your mortgage rate and high administration charges. That might make you wonder if you can get away with renting in secret.
Property transactions continue to slump and whilst some mortgage lenders are reducing their deposit criteria, many are still demanding large deposits in return for good deals. This is making many homeowners consider renting to move, rather than selling up.
This process involves renting out your house so that you can rent another and gives owners a chance to ride out the slump and also avoid the high cost of moving home. Unfortunately, the response from mortgage lenders has been fairly unsupportive in recent years. Where once many mortgage lenders would grant a ‘consent to let’ and maybe charge a small admin fee, many now demand a significant rate hike in addition to larger administration fees. It seems the mortgage lenders aren’t keen on the idea of renting rather than moving and with good reason from a business point of view.
So, back to the question – can you rent your home out on the quiet? With many lenders forcing borrowers into expensive buy-to-let products and charging high fees it can be very tempting to rent without informing your mortgage lender. However, according to the Council of Mortgage Lenders, you would be committing serious mortgage fraud. Also, any tenancy agreement you draw up and agree with the tenant will be null and void should the mortgage company find out you are renting and wish to take matters further. There have been cases of tenants being served eviction notices for the next day and any agreement you have put in place will not be valid.
If you are serious about renting out your home for the foreseeable future then it’s very wise to tell your mortgage company. Not only will you sleep better at night, but you can also be sure you are operating in accordance with your mortgage agreement and tenancy law. You will also need to advise your home insurance provider to ensure the right insurance is in place.