Is it illegal to rent a house without a buy-to-let mortgage?

If you’re an owner-occupier, the terms of your residential mortgage will state that you’re unable to rent your home to anyone without obtaining prior consent.

Even if you’re continuing to live in the house and are planning to rent out a room, your lender will still want to know.

If you breach these terms, you are committing mortgage fraud. As a consequence of doing this, you may face a fee or rate rise. In extreme circumstances, your lender may recall the mortgage and insist that it’s paid in full immediately. This could leave you in a predicament, as it’s often difficult for mortgage fraudsters to find other lenders to work with.

Most homeowners looking to rent out their home will obtain a buy-to-let mortgage. However, there are some alternatives to buy-to-let mortgages that may prove more suitable.

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

Some mortgage lenders will let you add a “consent to let” to your residential mortgage. This is typically only available after holding the mortgage for a minimum amount of time – and your lender will need to be convinced that letting out your home wasn’t your original intention.

To gain a consent to let, you’ll usually have to pay a one-off fee or switch to a higher interest rate. There may also be a cap on how long you can rent your home for.

Nevertheless, this option may still prove more convenient than remortgaging to a buy-to-let deal. Learn more about consent to let here.

Consumer buy-to-let mortgage

This is a buy-to-let mortgage aimed at accidental landlords.

If you’ve inherited a second home, or want to let out a home you’re unable to sell, you’ll need to get one of these mortgages.

The main difference between these mortgages and a traditional buy-to-let mortgage is regulation. Consumer buy-to-let mortgages will be regulated by the FCA, while normal buy-to-let mortgages are not.

The market for consumer buy-to-let mortgages is small, which means mortgage rates aren’t particularly competitive, although this appears to be slowly changing.

Cash buyers

If you pay for a property in full or your mortgage is completely paid off, you’re free to let it out. There is no mortgage for you to breach.

Can I rent out a property to friends and family members?

Some lenders won’t allow you to rent to family members, but others will.

If renting to a family member, you may need to obtain a “family buy-to-let” mortgage, which is regulated by the FCA.

These FCA regulations state that you must charge tenants a “fair rent” based on similar properties in your area. You must also complete the necessary checks on the property and on the tenant as required by law. Learn more about renting to a family member.

Can I live in a buy-to-let property?

Most buy-to-let mortgages won’t allow an owner to occupy the property under any circumstances.

The reason is that lenders could face punishment if they arrange an unregulated mortgage for an owner-occupier.

If you do live in your buy-to-let property for any amount of time, you could invalidate the terms of your mortgage and be asked to repay the loan in full.

Can a residential mortgage be changed to a buy to let mortgage?

It’s very common to do this. All that’s needed is consent from your lender. If they refuse, though, you can opt for a remortgage with a new lender. The only downside with this option is that early redemption penalties may be incurred, so it’s worth checking with your current lender before making the switch. To do this, begin by consulting a broker to ensure you’re eligible for the switch. They’ll also be able to check what buy to let rates you can get, ensuring your rental income is maximised. If you already get a good rate with your current lender, though, it may be worth sticking with them.

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Matthew Boyle

Matthew Boyle is a banking and mortgages publisher at Finder. He has a 7-year history of publishing helpful guides to assist consumers in making better decisions. In his spare time, you will find him walking in the Norfolk countryside admiring the local wildlife.

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