The short answer is, ‘it depends’. The right answer will rely on a variety of factors.
Almost all, if not all, mortgage lenders will either prohibit you from letting your home to a third party or they’ll set restrictions and have formal requirements around notification, etc.
It’s always difficult to be specific on this subject because each lender and each mortgage will have its own terms relating to this renting out your home and associated issues.
However, in general terms, it’s unlikely that you will be able to let your home without at least first notifying your lender and revising your home insurance policy to allow for the new circumstances. Failure to do either could have serious repercussions.
For example, what if your home has a fire? If the property is not occupied by you and you’ve not notified the insurer, you may well not have the insurance you think you do!
Even if your mortgage lender agrees that you may rent out your home and grants “permission to let” perhaps temporarily, you are still likely to see some changes to the terms and conditions of your mortgage. In addition to revising or replacing your existing home insurance, it’s likely you’ll end up paying more interest too. Most lenders have a different rate for ‘buy to let mortgages’ and just because you originally bought to live won’t generally mean you will be paying the original interest rate from hereon.
Some lenders will simply not allow you to rent out your property. This is a more serious situation as it puts you in a difficult position legally and financially. Letting the property without permission or without notifying the lender may put you in breach of your mortgage and will almost certainly jeopardise your insurance policy.
If you need to change mortgage providers it’s important that you take advice ealy. Mortgage terms will vary as will the lending criteria and buy to let mortgages are different animals to the ‘bog standard’ home buyer’s loan.
Furthermore, there will be punitive tax considerations, especially if you and/or your co-owners are paying tax at the higher marginal rate. There is also the likelihood of penalties for early redemption and the inevitable charges related to remortgaging. Take advice early - and take it from experienced, qualified and registered mortgage advisors.
To speak to a buy to let mortgage adviser contact us on 01628 507477.
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