You may want to rent out your property for different reasons. It could be to support your retirement years or to earn part-time. However, you cannot rent the mortgaged property without the permission of the mortgage provider.  It is something that individuals do not pay heed to. It is because after mortgaging your property, the mortgage provider shares more authority over it than you. It would depend on him whether he is okay with you renting out the property.

Generally, most mortgage providers allow individuals to rent out the property. However, they may ask you to pay a high interest rate for any changes you make. This is because a mortgage is a long-term agreement. Moreover, selling the mortgaged property is not allowed. It thus prevents one from earning extra from their property. However, renting it out may help you earn extra.

Do you need to tell your mortgage lender before renting the property?

Yes. You must inform your mortgage provider before renting the property. This is because when you decide to rent a residential mortgage, the mortgage terms are changed. It turns out to be more of a buy-to-let mortgage. You then can legally rent the property. Failure to tell the mortgage provider of your decision to rent the residential property can lead to serious consequences. This is because renting out to a tenant changes the mortgage provider’s perspective on the property.

They would like to review the risk of a buy-to-let mortgage or renting the mortgaged property. Similarly, your mortgage provider may also ask about the tenant. He would like to know in detail about the tenant, the rental agreement period, and the rent you charge. Thus, listing the details may also affect the ability to claim capital losses associated with the buy-to-let’s expenses.

Can you get caught if renting on a residential mortgage?

Yes, you may get caught for renting out a home on a residential mortgage. This is because renting out a property on a residential mortgage is illegal. It may lead to severe consequences. Most individuals may think of this while downsizing or need extra cash surplus. Or you may want to pay off the mortgage using the rent amount.

For this, you need to get consent to let your mortgage provider know. If you rent the property without this document, you may face life imprisonment. With a criminal record, you may not be able to qualify for any loans or credit cards. Moreover, resuming the buy-to-let business would be impossible then.

Do you need “Consent to let” to rent with a joint mortgage?

Yes, you must get “consent to let” from the mortgage provider if you are on a joint mortgage. It will help you legally switch to a buy-to-let mortgage to rent out the property. A consent-to-let is a formal agreement with your mortgage provider that provides you the permission to rent out the home temporarily without changing the residential mortgage. The “consent to let” form is ideal in situations like:

• You are seeking a temporary relocation
• The joint owners may decide to sell the home. The consent to let helps you earn from the rent until you sell the home
• Consent to help you get the tenants sooner
• Freedom from a fixed-term residential mortgage. It grants you the consent to pay the mortgage through the rental income. However, you must reconsider your opinion of remortgaging the property without early payment charges.

Discuss the rental agreement details with the co-owner. Identify the individual in charge of the property maintenance and rent. It is important to understand your responsibilities in a joint mortgage agreement. Check how you would like to split the rental payment as co-owners. You can also analyse the best ways to settle the loan payments timely without missing a penalty. Otherwise, this may hamper both individual’s credit scores.

What could be the consequences of renting on a residential mortgage?

If you get caught renting on a residential mortgage, you may face the following consequences. It is because you will be breaching the mortgage conduct by switching the agreement immediately. Here is what you should know before renting your home on a residential mortgage:

• You must pay the remaining amount in full
• You may have to pay additional fees and an extra penalty
• Your residential mortgage will be converted to a buy-to-let property

The repercussions may differ according to the mortgage provider’s rules. It may hamper your landlord license and the ability to operate legally as one in the country.  It will hamper your property and ownership.

Do I need to change the mortgage before letting it out?

Maybe you need to switch to a buy-to-let mortgage before renting out your house on a residential mortgage. It is important to understand how long you intend to rent out the property. If it is temporary, then you may let it without worries.

 Alternatively, if you want to rent out a property on a longer-term basis while holding onto its residential mortgage, you must follow other terms. It probably needs you to remortgage the property into a buy-to-let product.

What are the tax implications for renting out your residential mortgage property?

Renting your house while you still live in it is not considered to be running. There can still be taxation issues associated with that.  However, you don’t need to pay anything for your primary residence. But any property that you own besides that is taxable. Moreover, commercial properties are tax-bound. You cannot escape it there. However, you may also be eligible for certain deductions.

 For example- if you rent out your bedroom, you may be eligible for a 10% deduction on the rental income. It is if your income is less than £7500/year. It is also liable to pay if you are leaving your mortgaged property and moving on to another. It is important, especially for those seeking to move the existing mortgage to the new one.

Check out the interest on Mortgages for Moving Homes and benefit from it if the interest is low. It reduces the liabilities to pay a higher amount.  You can also top up the new mortgage if required. However, you need to check with the provider whether you can port the mortgage. If not, then you need to finish off this mortgage first to get on a new one.

Bottom line

Precisely, you may need to change the mortgage to buy-to-let if you plan to rent the mortgaged home. This is because renting a mortgaged home without telling the mortgage provider is illegal. It may subject you to 10-year or lifetime imprisonment. Moreover, you may lose control over the property, and finances may fall. Check the above aspects to determine the best one for your needs.