If you need to move but you can’t sell, getting consent to let from your mortgage lender allows you to rent out your home on a residential mortgage.
When you take out a residential mortgage, one of the criteria will be that you’re not allowed to let out your property - if you do so without telling your lender, there can be some dire consequences.
If your mortgage lender discovers you’ve moved out and have tenants living in your property, they may view it as mortgage fraud and could even demand that you repay the mortgage immediately or they’ll repossess the property.
In fact, the stakes are so high, you’d be a fool to run the risk of letting out your property without permission - your lender only needs to check past letting ads or the electoral register and your cover will be blown.
But if you do want to let out your home, you may not need to switch to a buy-to-let mortgage. Instead, many lenders will allow you to apply for consent to let, which gives you permission to take in tenants on your residential mortgage.
Consent to let agreements are usually only valid for a limited time - for example, the time you have remaining in a fixed-rate mortgage deal, or for 12 months at a time.
This means they’re not a long-term solution for prospective landlords, but can be a handy stop-gap while you move house and rearrange your finances.
Probably the most common reason for wanting a consent to let is if you need to move further afield for work. As it would help you to cover costs on your previous home while you rent or buy elsewhere.
You might also want to move if you’ve decided to live with a partner. A consent to let would allow your home to earn its keep before you sell it, while you wait out the expiration of any early repayment charges on your mortgage.
Note that consent to let isn’t a cost-free solution - you’ll still have to meet your obligations as a landlord, including inspections, maintenance, repairs and taking out landlord insurance.
As residential mortgages are generally cheaper than buy to let ones, you might think consent to let is an ideal way to save money on an investment property - not so unfortunately.
Lenders will usually either charge an extra percentage rate on top of your normal rate or there’ll be a fee to gain consent. Some lenders will charge both.
The cost of consent to let varies from lender to lender, so you may need to call your lender to ask if they allow consent to let and what they charge.
It’s not just extra costs that deter investors from using consent to let so they can sidestep buy to let mortgage rates - lenders could include any or all of the following restrictions on gaining permission.
You may have to have held your current mortgage deal for a certain length of time e.g. 12 months.
It’s likely there’ll be a time limit on how long your consent to let is valid for before it’s reviewed e.g. 12 months.
You might need to have a certain level of equity in your home e.g. 25%.
The rental income will need to comfortably cover the mortgage e.g. 125% on an interest-only basis.
You might need a certain minimum income to get consent to let.
Help to Buy and shared ownership mortgages frequently contain clauses forbidding letting out your property as it may be viewed as subletting.
If you have this type of mortgage, you’ll probably have to find a way to convert to a standard mortgage (repaying any shared equity or government loan in the process) before considering getting consent to let.
The main advantage of consent to let is that it allows you to move house quickly while reducing the stress of paying for two mortgages, or mortgage and rent, simultaneously.
Because the lender is likely to make sure the rental income comfortably covers the mortgage payments, it should at least cover costs.
It’s also a relatively straightforward way to start renting out your home without fully committing to a buy-to-let mortgage and the hefty fees that are often associated with them.
Consent to let isn’t risk free - if you can’t find tenants for your home for whatever reason, you’ll be in the stressful situation of meeting the mortgage payments as well as rent or mortgage on the home you move to.
Also, there are still costs associated with consent to let.
As well as mortgage fees and/or a higher interest rate, you’ll still have all the other costs associated with becoming a landlord.
You might need to engage a letting agent to market and manage your property and you’ll have to make sure décor and furnishings are safe and attractive for tenants.
You’ll also have to meet any other landlord obligations like fitting smoke alarms and getting a gas safety certificate for the boiler.
You’ll have to arrange and pay for repairs and maintenance during the tenancy, so it’s a good idea to set aside some savings aside as a contingency fund.
As consent to let is usually only granted for a limited length of time, you’ll have to think about what to do when it ends.
Your lender may grant you an extension if you’re still within a mortgage deal term, or it may offer to convert your loan to a buy-to-let mortgage.
If you decide to commit to being a landlord and do this, don’t just take your existing lender’s offer without shopping around first.