Consent to lease

Rubyminx

Why do I have to pay more to lease my property ? I wish to rent my home out, but have to apply for a Consent to Lease, which will increase my rate with the mortgage lender and so my monthly outgoings. The rental income will not cover the cost...which I am. Prepared to make up in the meantime. Besides, I have been advised that I cannot make a profit when renting my house out ! It's my house - why do I have to pay the lender more money ?
RM

ACG

If your renting a house out, its seen as more risky to the lender than if you were living in the property yourself. More risk = higher interest rate.

If your not happy move your mortgage elsewhere, try looking at buy to let mortgages you will see theyre exactly the same if not higher rates.

Nobody is forcing you to pay a higher rate, sell the property instead?

somethingcorporate

Because you signed a contract (the mortgage) saying it would be for you to live in.

If you rent it out it becomes a commercial business and hence subject to significantly more risk since there is no guarantee it would be let at all times and when it is not let there is no rent to cover the mortgage.

They price for risk and you are increasing their risk when you are ASKING for consent to let.

Thrugelmir

Rubyminx wrote: »

Besides, I have been advised that I cannot make a profit when renting my house out ! It's my house - why do I have to pay the lender more money ?
RM

Who said that you couldn't make a profit?

Not your house until the mortgage is paid off. Until that time your lender has a vested interest in being repaid the debt you owe.

kingstreet

It's worth bearing in mind the rent is a taxable income to be declared to HMRC. You can offset expenses such as mortgage interest, but none of the capital element of the monthly payment, letting agency fees, maintenance, insurance etc.

It is possible that you may be paying out more than you receive in rent, but you still have to pay tax, because your mortgage payment is mostly capital later in the term of the mortgage.

Rubyminx

What might happen if I rented my home out without a consent to lease ?
My partner could get a mortgage on his own and we could live together in the 2nd home while renting mine out.

ACG

The lender might find out and give you a time limit to remortgage away from them.
Your post (mortgage statements) go to whoever is living in the property.
Your building insurance might not be valid - you would have to check with the insurance company and find a company that wouldnt mind that scenario.

Not trying to scare you, just answering the question.

For the record, i used to own a property i rented out many years ago. I never got consent to let as i genuinely didnt know you needed it. But that doesnt take from the risk of what may happen - i had someone living in the property who thought it was fine to drill a 6 inch hole in the front wall converting the basement to somewhere she could grow marijuana - this is a house in a nice area, woman with a steady job and 2 kids who were around 5-6 years old someone you really wouldnt expect it from.

The other tenant i had locked himself out 3 times in 6 months and burnt a carpet in the carpet with an iron and then denied it (Until i shown him the receipt showing it was fitted the day before he moved in).

Its worth thinking about whether you want the hassle that comes with renting a property out. Dont forget if you go through a letting agents they will take around 10-15% of the rent.

GMS

Rubyminx wrote: »

What might happen if I rented my home out without a consent to lease ?
My partner could get a mortgage on his own and we could live together in the 2nd home while renting mine out.

You would be in breach of your mortgage conditions. You would need to take landlord insurance which could alert the lender as to your intentions.

Your current mortgage would be taken as a commitment by the new lender so will impact affordability. They may ask for copy of consent to let or a buy to let mortgage offer.

Buying a second property can be restricted LTV depending on the lender.