Consent to Let

What is consent to let?

Consent to let is a formal agreement in writing that confirms your lender has given you permission to rent out your home on a short-term basis, such as between 6 and 24 months. It doesn’t change your residential mortgage but is, instead, an agreement that’s attached to it. This is necessary because a standard residential mortgage is usually designed for the owner to occupy the property.

Getting consent to let is a legal requirement and if you rent out your home without having permission from your lender, you’ll be in breach of your mortgage terms. This can be considered as mortgage fraud and there can be serious consequences. For example, your mortgage rate may be increased, you may be charged a penalty fee or you may have to repay your entire mortgage loan immediately.

Not every lender offers a consent to let agreement so just double-check this with your lender first if you’re considering leaving your home for a short period. Some homeownership schemes won’t permit the use of consent to let so, again, check with the lender first. If you prefer to rent out your property on a long-term basis instead, you need to change your standard residential mortgage to a buy-to-let mortgage.

Permission from other parties

As well as getting permission from your lender, there are some circumstances when you need to seek permission from other parties. If a housing association or another organisation has dealings with your property, such as if you bought a shared ownership home, they’ll have regulations about the property’s use that you need to adhere to. Therefore, it’s essential to get their formal permission too if you wish to rent out your home on a temporary basis. Another interested party is the insurance provider. It’s important to check with them whether your home insurance is adequate or if you need to change it to landlord insurance.

Why might you need consent to let?

There are many reasons why you might need or want to temporarily move out of your home and rent it out while you’re not there. The following reasons tend to be accepted when asking for consent to let from a lender:

• You need to temporarily relocate to another part of the UK for your job.
• You’ve been given a short-term opportunity to work overseas.
• You’re a serving member of the armed forces and have been deployed or stationed abroad.
• You’re taking time to travel for a few months.
• A relative needs care so you are moving in with them.
• You are moving in with someone else and want to temporarily rent out your home while you decide whether to sell it or use it as a long-term rental property.
• You have a fixed rate mortgage and wish to leave the deal early but will be penalised by an early repayment charge. Getting consent to let will enable you to rent out your property until the end of the fixed term and, therefore, avoid a hefty fee.
• You’re already in the process of switching to a buy-to-let mortgage but have tenants waiting to move into your property. With your lender’s consent to let, you can legally let out your property to them while the buy-to-let mortgage is being processed.
• You have bought a new home but are struggling to sell your existing one. You can temporarily rent it out when you have consent to let from your lender, using the income to cover your mortgage payments until it’s sold.

Is consent to let the same as buy-to-let?

Whilst consent to let and buy-to-let both relate to you renting out your property, there are distinct differences between them. Consent to let isn’t a type of mortgage. It’s an agreement that is attached to your existing residential mortgage. It allows you to temporarily rent out your home if:

• You won’t be living in the property at the same time as the tenants.
• You’re planning on moving back into the property once the short-term tenancy has ended.

Buy-to-let, on the other hand, is a type of mortgage that’s specifically designed for landlords and rental investment properties. It caters to the risks involved with renting out properties and, as such, has stricter criteria, a higher deposit requirement and a higher interest rate than a standard residential mortgage. A buy-to-let mortgage is ideal if:

• You want to become a landlord and earn rental income
• You want to rent out the property for the long term and have no intention of moving back into it

How long does consent to let last?

Consent to let is a short-term solution while you’re temporarily away and will be moving back into your property or you’ve moved out and are deciding what to do with your property in the long term. As such, it’s typically granted for between 6 and 12 months. However, some lenders are happy to grant it for longer, such as for 24 months, depending on the circumstances.

In some cases, you may need the consent to let agreement to last for longer. For example, if you’re working abroad and your contract has been extended. In this case, your lender may agree to a long-term extension of your consent to let in exchange for an annual fee.

What happens when your consent to let ends?

Once your consent to let agreement has ended, your residential mortgage conditions will revert back to the original ones. This means that you’ll be in breach of your mortgage conditions if you continue renting out your property.

Ask for a consent to let extension

If you want to continue renting out your home on a short-term basis, you can ask your lender to extend your consent to let. Just be aware that they’re not obliged to grant you an extension. If they do agree, they’ll likely charge you an annual fee for this.

Arrange a buy-to-let mortgage

If you want to continue renting out your property on a more permanent basis, you’ll need to change your current mortgage to a buy-to-let mortgage. Your lender may offer to switch your existing mortgage over to a buy-to-let mortgage for you. This is a convenient option and you may prefer it if you’re happy to stay with the same lender. However, it’s a good idea to shop around and compare the buy-to-let deals being offered by other lenders. You may be able to remortgage with a new lender and benefit from a better rate or more flexible terms than those being offered by your current lender.

Our mortgage brokers can compare all of the buy-to-let options available to you. Just get in touch if you’re ready to use your property as a long-term rental investment and we’ll find the best buy-to-let mortgage deal to suit your needs and circumstances.

Move back into your home

You may be ready to end the short-term rental agreement and move back into your home. It’s important to make sure your lender is aware that the property’s use has changed back to being owner-occupied.

Sell your property

You may have no desire to move back into your home or continue renting it out on either a short or long-term basis. In this case, you can sell the property and repay your outstanding mortgage loan from the proceeds of the sale.

What happens if you rent out your property without consent to let?

A standard residential mortgage is designed for an owner-occupied property, which means that you must live in the home you’ve purchased with the mortgage. As mentioned earlier, there can be serious consequences for renting out your home when you haven’t obtained permission from your lender. Being granted consent to let before allowing tenants to move in is a legal requirement. Without it, no matter how brief the rental period, you’ll be considered to have breached your mortgage terms. The financial penalties can vary widely for this. The lender may:

• Impose a penalty fee on you
• Increase your interest rate, which will increase your monthly mortgage payments and the overall cost of your loan
• Charge you backdated interest from when you began renting out your home
• Refuse a request to borrow more on your mortgage
• Demand that you repay your entire loan immediately
• Repossess your property if you’re unable to repay your loan

As breaching the terms of your residential mortgage agreement is considered to be mortgage fraud, this can also affect your ability to secure a mortgage in the future. Your home insurance policy may also be invalidated because rental properties pose a higher risk than owner-occupied ones. To cater to this, landlord insurance has to be arranged instead of standard home insurance.

Not obtaining consent to let can also have serious consequences for the tenants. As they’re considered to be unauthorised tenants, they won’t have the legal rights that normally apply to tenants. As well as that, the tenancy terms may not, in fact, be binding and they may face eviction.

The costs involved in consent to let

Lenders usually charge a fee when confirming a consent to let agreement. This can either be paid up front or added to your mortgage. Just bear in mind that if you choose the latter option, interest will be charged on it, increasing your costs further. Not all lenders charge this fee to all borrowers. For example, most lenders won’t charge you a fee if you’re a member of the armed forces.

Some lenders increase the mortgage rate you have to pay during the period the property is rented out. An additional fee is also charged by the lender if you wish to extend your consent to let.

Landlord costs

As you’ll become a landlord when you rent out your property, you need to be aware of the additional costs that come with this. We’ve already mentioned that you need landlord insurance instead of standard home insurance. You also need to comply with various rules and regulations before any tenants move in. For example, a gas safety check must be carried out, your property must have a minimum EPC rating and your furniture must comply with fire safety standards. You’ll also be responsible for maintenance and repair costs, legal fees for drawing up the tenancy agreements, potential tax on your rental income and letting agency fees.

Are consent to let fees tax-deductible?

A consent to let fee is a pre-letting expenditure that is exclusively for the purpose of renting out your property. As such, it is tax-deductible. Each tax year, you have a tax-free property allowance of up to £1,000 in earned rental income. After that, income tax can become payable on the rental income. You need to submit an annual Self-Assessment tax return, declaring the amount you have received after allowable expenses. Your allowable expenses can include:

• Insurance, such as buildings, contents and property owners’ liability insurance
• Letting agent fees
• Accountant fees
• Costs of services, such as cleaning and gardening services
• Safety check costs, such as for a gas safety certificate and an electrical safety report
• General maintenance and repair costs
• Gas, electricity, council tax and water rates bills
• Direct costs, such as stationery, postage, advertising and telephone calls
• Legal fees for a let of up to a year

During the period your home is rented out, you should also be able to claim 20% tax relief on your mortgage interest payments.

Eligibility criteria for consent to let

If you plan to move out of your home temporarily and rent it out, you need to apply for consent to let from your lender. Each lender has specific conditions that need to be met and these conditions differ between lenders. Generally, the following apply:

• You need to have held your mortgage with the lender for a minimum period, such as 6 or 12 months.
• There are no missed mortgage payments or arrears.
• Your home is being rented out on a temporary basis.
• You have a valid reason for letting out your property, such as relocating for your job.
• You have gained consent from each mortgage account holder.
• There may be a minimum equity requirement in your home, such as 25%.
• The rental income must cover the monthly mortgage payments.
• Your home is rented out on a single tenancy basis.
• You’re not renting out your property to immediate family members.
• The tenancy must comply with a maximum occupancy level.
• An assured shorthold tenancy agreement (AST) or other acceptable tenancy agreement, depending on the property’s location in the UK, must be in place.
• No further borrowing is allowed on the property while it is being rented out.
• Your insurance provider must be notified and a separate landlord insurance policy may need to be taken out.
• Written confirmation of consent must be provided by the scheme provider if you have a shared ownership

How to get consent to let

You can usually apply online for consent to let or by downloading and completing the relevant form on the lender’s website. This form can then be returned to the lender via email, by post or in person at the local branch. You may also be able to request a consent to let form over the telephone.

For your application to be accepted, you’ll need to agree to the terms and conditions they have specified. If you’re eligible, you may need to pay a fee before they approve the consent to let agreement. This depends on the lender and your circumstances. For example, some lenders charge a one-off fee while others don’t charge when giving consent to let. Another example is that some lenders who do charge fees won’t apply this charge if you’re in the armed forces. When submitting your application, you may need to provide proof of your reason for temporarily moving out, such as an employment contract or some travel documents.

It’s recommended to apply about one month before you intend to rent out your home to allow time for your application to be processed. If you let your home without waiting for your lender’s permission, you’ll be in breach of your mortgage contract.

Can you be refused consent to let?

Lenders are generally flexible when it comes to allowing consent to let for a short period. There are, however, instances when a consent to let request may be refused. This can be for various reasons, such as your financial circumstances, your mortgage terms, the lender’s policies or external factors if you have a shared ownership home, for example. Your consent to let request may be denied for any of the following reasons.

You haven’t had your mortgage for long enough

You typically need to have owned your property for at least 6 months before lenders consider giving consent to let. Some lenders have a longer requirement of 12 months.

You have missed mortgage payments or arrears

If you have a history of missed mortgage payments or are in arrears with your payments, the lender may refuse your consent to let request.

You don’t have enough equity in your home

Lenders usually require you to have a minimum amount of equity in your home, such as 25%.

You don’t meet the lender’s minimum income requirement

Some lenders stipulate that a minimum income threshold has to be met before they’ll consider giving consent to let.  

You want to rent your home out to more tenants than are allowed

Lenders stipulate the maximum number of tenants that can be accepted with a consent to let agreement. For example, you may be restricted to having up to five tenants and the tenancy will need to be on a single household basis. An accepted form of tenancy agreement, such as an assured shorthold tenancy agreement, must also be signed.

You may be restricted by an ownership scheme

If you bought your home via a government scheme, such as shared ownership, permission to let it may be denied by the scheme provider, such as the housing association. This is because renting out your home in this instance is classed as subletting. Subletting isn’t typically allowed unless you’re a member of the armed forces.

You want to rent your home out for longer

Consent to let is only given for short-term lets. If you’re planning to rent out your home for longer than the lender’s agreed consent to let period, you need to switch your mortgage to a buy-to-let mortgage instead.

The lender may have exhausted their consent to let limit

Some lenders cap the number of consent to let agreements they offer. If they have already reached that limit when you apply for consent to let, your request will be denied.

What happens if your consent to let request is denied?

If your request is denied, there are a few options to consider, as detailed below.

• Appeal the lender’s decision. You can appeal the decision in writing if you feel that you have met all of the criteria and your request has been unfairly denied.
• Compare different lenders’ criteria. Lenders have varying criteria for consent to let agreements and some don’t offer this option at all. If your lender doesn’t offer consent to let in general or does but your request has been rejected, find out what criteria other lenders have. If renting out your home on a short-term basis is a necessity for you, it may be worth changing to a new lender. Just make sure that you’re aware of any penalty fees from your current lender and costs for the new lender if you decide to do this.
• Switch to a buy-to-let mortgage. If your request is rejected, you may decide to rent out your property for longer. In this case, you can switch your mortgage to a buy-to-let mortgage. Whilst this has stricter eligibility criteria and a higher interest rate, it’s specifically designed for rental purposes.

If you’re denied consent to let, don’t take the risk of renting out your home — it’s simply not worth it. At the least, your lender may increase your interest rate and charge backdated interest to the date the tenancy began. They may also charge you a penalty fee. Your home insurance  may also be invalid due to the increased risk posed by rental properties. In a worst-case scenario, your lender can demand that you pay back the entire mortgage loan immediately. If you’re unable to do this, they can repossess your property.

The pros and cons of getting consent to let

Before committing to a consent to let agreement with your lender, consider both the advantages and disadvantages of doing so.

Pros

• You won’t be in breach of your mortgage. Having consent to let means that you can rent out your home on a short-term basis without breaking the terms of your mortgage.
• You don’t need to commit to a buy-to-let mortgage. With this permission from your lender, you can keep your current residential mortgage and rent out your home without worrying about any repercussions.
• You can test the waters as a landlord. Being a landlord can be time-consuming and there are many rules and regulations to adhere to. Having a short-term arrangement gives you the chance to see what it’s like to be a landlord and whether you’d consider taking on this role in the long term.
• The rental income covers your mortgage payments while you’re away. Whatever your reason for temporarily moving out of your home, you can have peace of mind that your mortgage payments are covered by the rental income you receive during that time.
• You can avoid an early repayment charge. If you have a fixed rate mortgage but want to leave your deal early, the lender may penalise you with an early repayment charge. With consent to let, however, you can rent out your property until the end of the fixed term and avoid having to pay this fee.
• You can let waiting tenants move into your property. If you already have tenants waiting to move in but are still in the process of arranging a buy-to-let mortgage, getting consent to let is a much quicker arrangement. It allows you to let the tenants move in and legally rent your home while your buy-to-let mortgage is being processed.
• Some circumstances are more flexible. Not all lenders charge a consent to let fee in some circumstances, such as if you have to leave your home for a military deployment. Likewise, if your home was purchased via a government scheme, such as shared ownership, and you’re in the armed forces, you may be given permission to sublet it, which wouldn’t ordinarily be the case.

Cons

• There are costs for this arrangement. Your lender may charge you a fee when granting consent to let and/or an increased mortgage interest rate.
• Not all lenders offer consent to let. If you think you’re going to need this option, check that your lender offers it and what their criteria are.
• It is a short-term solution. If you think you’re going to need a rental arrangement that’s in place for a long term, then consent to let won’t be adequate.
• You take on the costs and responsibilities of being a landlord. As a landlord, even for a short while, you have to ensure that you comply with the relevant rules and regulations. You’re also responsible for any maintenance and repairs to the property.
• It can take time to find tenants. You need to bear in mind that you might not find tenants straight away. Regardless of this, you still need to maintain your mortgage payments.
• Your tenants may not look after your property. Not all tenants look after rental properties and, by renting out your home, you take on the risk that it may be damaged or be subject to more wear and tear than if you lived there.

Get expert advice on your consent to let options

If you’re thinking about renting out your home temporarily and don’t want to switch your residential mortgage to a buy-to-let one, obtaining consent to let from your lender is the solution. You may be charged a fee and/or a higher rate of interest during the agreed rental period but you can have peace of mind that the rental income will cover your mortgage payments while you’re unable to live in your home. When you’re ready to move back in, your mortgage terms can simply revert back to normal. If, however, being a landlord suits you and you want to continue renting out your property on a permanent basis, you can switch your mortgage to a buy-to-let mortgage instead.

Our mortgage brokers are here to offer you impartial advice when you’re trying to make the right decision. It’s important to understand the implications of having a consent to let agreement and your obligations as a landlord, even on a temporary basis. Lenders have different criteria when giving consent to let and our brokers can help determine whether you meet them for your lender. They can also explain how landlord insurance differs from your normal home insurance and arrange this for you.

Get in touch with us on 01322 907 000 for expert advice on how renting out your home affects your mortgage. If you prefer, send us an email at info@trinityfinance.co.uk or an enquiry via our contact form. One of our mortgage brokers will reply to you as quickly as possible with more information.