If you have a property that you no longer wish to live in and instead rent out, it’s essential that you communicate this to your mortgage company so that you can arrange a buy-to-let mortgage. If you don’t do this, you could be at risk of committing mortgage fraud. When you take out a residential mortgage, one of the lending conditions will be that you don’t let the property.
Many investors choose to be a landlord as a career choice or a means to make extra money. Still, for some, it is an unavoidable result of moving in with a partner, moving to a new city for work or feeling the market conditions aren’t suitable for a sale. Whatever the reason, you must tell your lender.
Lenders have developed sophisticated methods for catching anyone renting a property without an appropriate mortgage. Something as simple as a tenant returning mail in your name that has been sent to the property from the lender could trigger an investigation and result in you getting caught. They also use complex data-sifting methods like those used by HMRC to catch anyone who avoids their tax obligations. This reportedly involves scouring the internet for clues that the property may be let out, although lenders have openly confirmed this.
If you neglect to tell your lender that your property is being rented out and request ‘consent to let’, the lender can demand the instant repayment of your whole mortgage, something which most people would be unable to do.
According to the Council of Mortgage Lenders (now a part of UK Finance), letting a property without your lender’s consent could be considered a breach of the terms and conditions of the mortgage and could entitle the lender to seek immediate repayment of the entire loan. In addition, you could have a black mark on your credit report making it difficult to secure lending in the future.
The most likely scenario is that your lender will agree to change the terms, even though they can enforce a substantial penalty. Changing the mortgage terms could mean a limit on the years it can be rented out, and you may have to pay additional fees. However, by declaring that your home is being rented out, you could find no immediate cost increases. Many lenders will grant approval for the remainder of your mortgage deal without increasing your rate.
Talk to the Clyde Property lettings team if you would like more information on rental incomes and to find out more about our Rent on Time service.
Clyde Property is a leading independent, multiple award-winning estate agent with over 30 years of experience in selling and letting property in Scotland. Call your local Clyde Property branch today for friendly, impartial advice on letting and renting property.
