Consent to Let

Renting out your property can be a great way to generate income and make the most of your investment. However, if you have a residential mortgage, it's important to obtain consent to let from your mortgage lender before proceeding.

In this insight, we'll explore all things consent to let, providing you with the information you need to navigate this process with confidence. 

Key Takeaways

• Consent to let is a written formal agreement between you and your mortgage lender that allows you to rent out your property while keeping your residential mortgage.
• Renting out your property without obtaining consent to let can result in breach of mortgage terms, financial penalties, or repossession.
• Applying for consent to let is advisable in situations such as temporary relocation, waiting for a property sale, in the process of switching to a buy-to-let mortgage, or having a fixed-term mortgage.
• The process of applying for consent to let involves contacting your lender, providing supporting documents, paying any fees, and awaiting approval. Eligibility criteria include payment history, equity, loan-to-value ratio, length of mortgage term, income, and type of mortgage and property.

What is Consent to Let?

Consent to let is a written formal agreement between you, the homeowner, and your mortgage lender that allows you to rent out your property while keeping your existing residential mortgage in place.

It is a temporary arrangement that grants you permission to become a landlord without the need to switch to a buy-to-let mortgage.

Why is Consent to Let Necessary?

Residential mortgages are designed for homeowners who intend to live in the property they purchase. Renting out your property without obtaining consent to let would put you in breach of your mortgage terms and could result in financial penalties or even repossession. Consent to let ensures that you comply with your mortgage agreement while still being able to generate rental income.

If you let your property out without consent, you are technically committing mortgage fraud,

When Should You Apply for Consent to Let?

There are various situations where applying for consent to let is advisable. Here are a few common scenarios:

Temporary Relocation

If you need to move away for a short period due to work, travel, or caring for a relative, obtaining consent to let can provide you with the flexibility to rent out your home while you're away.

Waiting for Property Sale

If you're in the process of selling your home but haven't found a buyer yet, consent to let allows you to rent out the property while you wait for a sale. Another option would be to consider a bridging loan.

Buy-to-Let Mortgage Process

If you're planning to switch to a buy-to-let mortgage but haven't completed the process yet, obtaining consent to let can bridge the gap and enable you to start renting out your property.

Fixed-Term Mortgage

If you're locked into a fixed-term mortgage but need to move or rent out your property before the term ends, consent to let can provide a solution without incurring early repayment charges.

How to Apply for Consent to Let

The process of applying for consent to let varies depending on the lender. However, there are some general steps you can follow:

Contact Your Lender

Get in touch with your mortgage lender to express your intention to rent out your property temporarily. This can usually be done by phone, online application, or by downloading and completing an application form.

Provide Supporting Documents

Your lender may require supporting documents such as proof of your reason for letting, tenancy agreements, travel documents, or employment contracts. Be prepared to provide any necessary documentation to support your application.

Pay Any Fees

Some lenders charge fees for granting consent to let. These can vary and may be a one-time flat fee or an increase in your interest rate. Confirm the fees with your lender and be prepared to pay them if applicable. For example, Lloyds bank add an additional 0.5% to your mortgage interest rate during the time that you have consent to let.

Await Approval

Once you've submitted your application and supporting documents, you'll need to wait for your lender's decision. The timeframe for approval can vary, so it's important to plan ahead and apply in advance of your intended rental start date.

Eligibility for Consent to Let

Each lender has its own eligibility criteria for granting consent to let. While these criteria may vary, here are some common factors lenders consider:

Payment History

Lenders typically look at your mortgage payment history to assess your financial responsibility. If you have a history of missed payments or arrears, it may impact your eligibility for consent to let.

Equity and Loan-to-Value Ratio

Lenders may require a minimum level of equity in your property, typically around 25%, to grant consent to let. Additionally, they may consider the loan-to-value ratio to determine the risk associated with the arrangement.

Length of Mortgage Term

Some lenders require you to have been with them for a minimum period, usually between 6 to 12 months, before granting consent to let.

Income and Affordability

Lenders may assess your income to ensure that the rental income from your property is sufficient to cover your mortgage payments. They may also have minimum income requirements for granting consent to let.

Type of Mortgage and Property

Certain types of mortgages, such as Help to Buy or Shared Ownership, may have restrictions on letting out the property. Leasehold properties may also require additional consent from the freeholder or managing agent.

It's important to note that meeting the eligibility criteria does not guarantee approval, as each application is assessed on a case-by-case basis.

Advantages of Consent to Let

Obtaining consent to let can offer several advantages for homeowners who need to rent out their property temporarily:

• Maintain Your Existing Mortgage: Consent to let allows you to keep your residential mortgage in place, avoiding the need to switch to a buy-to-let mortgage.
• Generate Rental Income: Renting out your property can provide you with a source of income to cover your mortgage payments or other expenses while you're away or waiting for a property sale.
• Flexibility and Test Period: Consent to let gives you the flexibility to rent out your property temporarily without committing to becoming a permanent landlord. It allows you to test the waters and assess whether being a landlord is the right long-term decision for you.
• Avoid Early Repayment Charges: If you have a fixed-term mortgage, obtaining consent to let can enable you to rent out your property without incurring early repayment charges, which can save you money.

Disadvantages of Consent to Let

While consent to let offers flexibility and benefits, it's important to consider the potential drawbacks:

• Additional Responsibilities: As a landlord, you'll have additional responsibilities, including property maintenance, ensuring compliance with regulations, and managing tenant relationships.
• Tenant Vacancy and Income Stability: There may be periods of time when your property is vacant and not generating rental income, which means you'll still need to cover your mortgage payments.
• Costs and Fees: Obtaining consent to let may involve fees, such as application fees or an increased interest rate. These costs should be taken into account when assessing the financial viability of renting out your property.
• Property Wear and Tear: Renters may not treat your property with the same care and attention as you would, potentially resulting in wear and tear that may require repairs or maintenance.

What Happens When Consent to Let Ends?

Consent to let agreements have a specified duration, typically ranging from 6 to 24 months, depending on the lender. When the consent period comes to an end, you have several options:

Contact Your Lender

If you wish to continue renting out your property, contact your lender to discuss extending the consent period or explore the possibility of switching to a buy-to-let mortgage.

Consider Buy-to-Let Mortgage

If you have enjoyed being a landlord and want to continue renting out your property, you may decide to switch to a buy-to-let mortgage. This would involve remortgaging your property under different terms and conditions. For more information on how Buy to Let differs from Consent to Let, read our insight: Is Consent to Let Better than Buy-To-Let?

Evaluate Your Options

 Before making a decision, it's essential to consider the current market conditions, rental demand, and your long-term goals to determine the most suitable course of action.

Can You Get Consent to Let on a Leasehold Property?

Obtaining consent to let on a leasehold property may require additional steps. In addition to obtaining consent from your mortgage lender, you may need to seek permission from the freeholder or managing agent responsible for the leasehold property. Leasehold agreements often have specific clauses relating to subletting, so it's essential to review your lease agreement and consult with the relevant parties before proceeding.

Consent to Let as an Option

Consent to let is a valuable option for homeowners who need to rent out their property temporarily while keeping their residential mortgage in place. By obtaining consent to let, you can generate rental income, maintain the flexibility to adapt to changing circumstances, and test the waters of becoming a landlord. However, it's essential to carefully consider the advantages and disadvantages, meet the eligibility criteria, and follow the necessary steps to ensure a smooth and legal rental process.

Remember to consult with your mortgage lender, review your mortgage agreement, and seek any additional permissions required for leasehold properties. With the right approach, consent to let can be a beneficial arrangement that allows you to make the most of your property investment while complying with your mortgage terms.