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Q&A » Mortgages
Hi, My son needs to rent his house out as he has had a change in circumstances. He has a mortgage on the property. Can he just go ahead and rent it out or is it more complicated like having to change the mortgage. Any help/advise would be very much appreciated as I don't know where to start.
Thanks Lesley
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1Hi Lesley,
Your son should tell the lender. If he doesn't tell the lender, he'll almost certainly be breaching the terms of the mortgage. Of course, if he just rents out the property for a short time, there's a good chance the lender will never find out, but that's high-risk course of action which I wouldn't recommend.
So let's assume your son does tell the lender. What happens then?
- the lender may just say: 'tough, we insist you take out a new buy-to-let mortgage.'
- Or the lender may ask: 'do you plan to return to this property at some point and live there again?' If your son says 'yes', the lender may give him a 'consent to let' and he could then carry on with his current mortgage.
But, in the end, it's all at the discretion of the lender.
Hope that helps,
Ed Bowsher, Head of Consumer Finance, lovemoney.com
Posted on 07 May 2009 |
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212There's also gas hob to upgrade if fitted ... fire doors ... electric / gas certifications ... letting furnished or not ... fire retardant furniture ... solicitor for rental agreements ...
Posted on 07 May 2009 | Love 1 love
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272The best place to start is to take a look at the mortgage contract / T&Cs. That'll often state whether the lender will consider agreeing to let the property, and any associated fee.
Regarding SoftwareBear's comments, it's not all as complicated as it sounds! You'll need to arrange for a gas safety check, energy performane certificate, and possible electrical appliance testing. You'll also need to ensure that all furniture is fire safe, but unless it's more than twenty years old it usually is. You'll also need to get a rental contract and, if the tenant pays a deposit, that needs to be registered with a government backed scheme. However, if you're relatively new to letting, it could be best just to use a lettings agent. They can arrange all the safety checks, contracts and deposits and also advise on furntiure etc as well as completely manage the tenants. Of course they'll require a percentage of the rent to do this, but it can be a cost worth paying, especially if you're new to letting.
Posted on 07 May 2009 | Love 2 loves
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0 272Yes, you still need to ask Northern Rock for permission. Otherwise if they find out they can switch you onto a buy to let mortgage at a higher rate and back charge you for the additional interest. As far as I know Northern Rock are ok to provide consent to let, as long as you have a decent chunk of equity in the property.
Posted on 07 May 2009 | Love 1 love
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16This may be of help as well...
If the lender is Northern Rock, they will almost certainly want to know the circumstances that have caused your son to take this course of action. They will be sympathetic to anything which they see as stable action, but, in my opinion/experience, mortgage companies usually prefer the owner to be there, so the rationale will need to be convincing for them to grant him permission.
A part of the criteria could also be the LTV (loan to value) of the property. They will probably want a margin on this as well, probably at a standard buy to let amount (currently) of at least 75%.
Good luck, hopefully the newly nationalised peoples bank of Northern Rock will show some flexibility.
Saul Devine. MD. lovemoney.com
Posted on 07 May 2009 | Love 1 love
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11 0Just to make things a bit clearer. My son has a joint mortgage on the property with his friend who he lives with. Now my sons girlfriend is having a baby. So the living arrangements have to be considered, he cant really sell as in negative equity, so thinking about renting the property out until the market picks up.
Thanks for all advice/information
Lesley
Posted on 08 May 2009 | Love 0 loves
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0HI there - can I add a related question rather than an answer?
I'm in a very similar position, with Northern Rock as my mortgage provider. I contacted them asking if I could let my property and they refused as my value to mortgage ratio is over 70%. After a bit of research it turns out no mortgage company will offer a buy to let mortgage over 70%.
Due to circumstances I'm leaving my flat, so other than sell it what can I do?
Thanks!
Posted on 08 May 2009 | Love 0 loves
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0Hi there
You should also bear in mind that it is not easy to get buy to let mortgages at the moment, there are only a few providers with anything like reasonable mortgage rates available and the best rates are only available if the equity in your property is high. There are also issues depending on the type of tenant you want to let to. For instance most lenders are not keen on students and some will not lend for more than 3 or 4 tenants.
If you go ahead and Northern Rock are not willing to help. I would suggest going to a mortgage advisor as they will hopefully be able to help you find one suitable for your sons situation.
Also be very careful of the people you let to and make sure you get good references and if necessary guarantors for the rent. Letting agents are expensive, but can help with finding tenants and completing references, advertising, viewing etc. They will also be able to advise you what you require by law eg gas certificates, fire safety, EPC's etc. Also don't forget the new tenancy deposit laws.
There is a lot to think about so good luck!
V
Posted on 11 May 2009 | Love 0 loves
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