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Consent to Let – Everything You Need to Know

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Consent to Let – Everything You Need to Know
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If you want to rent out a property with an outstanding mortgage, you’ll usually need your mortgage lender’s permission before doing so. This is known as getting ‘consent to let. Without consent from your lender, letting your property could technically be considered a breach of your mortgage terms.

Getting consent to let can seem complex and daunting for many homeowners. In this guide, we’ll provide an overview of everything you need to know if you need consent from your mortgage lender before letting your property.

Not all mortgage agreements require you to obtain consent from your lender before renting out your property. However, the vast majority do. Standard residential mortgages are usually only intended to finance a property you occupy.

Most buy-to-let and holiday-let mortgages don’t require consent to let, as these types of mortgages are designed specifically for rented properties. But consent is nearly always needed if you have a residential owner-occupier mortgage.

To double-check if you need consent or not, thoroughly check the terms of your mortgage contract. It should explicitly state the requirement to obtain permission if it’s needed. If you can’t find or understand this information, contact your mortgage lender directly to query it.

There are a few key reasons why residential mortgage lenders usually require you to get consent before temporarily or permanently letting your property:

  • Increased risk: Renting involves some additional risks compared to an owner-occupied property. Tenants may potentially damage the property or fall into rent arrears. As your mortgage lender has a financial stake in the property, they want to assess and approve these increased risks.
  • Affordability: Mortgage lenders calculate how much you can borrow based on your expected living costs and outgoings as an owner-occupier. Letting your home can significantly change your expenditure, which may impact affordability.
  • Insurance: Standard building insurance often doesn’t cover rental properties. Your lender will want to check that the appropriate cover is in place.
  • Compliance: There are various laws and regulations related to renting property, covering safety, deposits and more. Your lender will want reassurance that you understand your obligations as a landlord before letting.

By getting consent to let, your lender permits you to change the original intended use of the property. The lender can then reassess if the associated risks are acceptable and affordable.

Yes, it’s entirely possible for consent to let to be refused by your mortgage provider. Every lender will have specific criteria used to make decisions about consent requests.

Typical reasons why a lender might refuse consent include:

  • Poor affordability: Letting a property can change your income and expenditure. If updated affordability checks suggest the mortgage payment is no longer affordable for you, the lender may deny consent.
  • Insufficient rental demand: Your lender may assess if there’s suitable local demand to sustain ongoing rental payments. Areas with known oversupply issues are more likely to be refused.
  • Property suitability: Some property types, such as high-rise flats, may be deemed unsuitable or undesirable for the rental market in general.
  • Loan to Value (LTV) percentage: Applications are more likely to be declined if you have less than 20-25% equity. Most lenders prefer rental properties to have lower LTV percentages.
  • Mortgage product restrictions: Particular mortgage deals may have specific clauses prohibiting letting. For example, lenders often forbid letting for a set period in new-build properties financed under Help to Buy schemes.

Before applying for consent, always thoroughly check if restrictions apply to your particular mortgage product. While refusals are possible, most consent requests that meet all eligibility criteria are approved.

Getting consent to let is usually relatively straightforward for standard residential mortgages with no letting restrictions. The process simply requires filling out a consent request application form and providing any documentation requested by your lender.

Approval timescales vary between lenders. Some may only take a few days to provide consent, while others can process requests for 4-6 weeks.

Provided letting is allowed under your product terms and property checks suggest letting is viable in your area, consent should not generally be too complex or onerous to obtain in theory.

However, banks and building societies have undoubtedly tightened and increased scrutiny around consent requests since the 2008 financial crisis. Following a spike in buy-to-let lending before 2008, lenders are typically more cautious about high LTV consent applications.

It’s also fair to say consent requirements have contributed to a decline in the flexibility for residential homeowners to let their property. Yet, for most homeowners with standard mortgages and sufficient equity, gaining consent remains relatively achievable. Just be sure to satisfy all affordability, property, and documentation stipulations to avoid delays or refusal risks.

The cost varies between mortgage lenders. Some charge admin fees to process consent requests. This is usually in the form of a one-off fee.

In a minority of instances, gaining consent may also incur early repayment charges on your mortgage – so always double-check this first.

On top of admin fees, you’ll usually need to switch your mortgage deal if you let your home under consent. This often means moving from your existing residential deal to a higher-rate buy-to-let product instead. Lenders can insist that you change products like this to comply with tighter buy-to-let regulations when letting a property.

Higher ongoing costs are the main financial downside of needing consent from most lenders. Yet, for many borrowers, the increase in mortgage payments is offset by achievable rental incomes on the property.

If you require consent from your mortgage provider before renting your property, keep these tips in mind to help make the process as smooth as possible:

  • Check eligibility upfront: Thoroughly read your mortgage offer documents first and identify any restrictions around letting. Also, clarify that your property type, loan amount and LTV ratio meet any threshold lending criteria.
  • Gather evidence: Have tenant referencing procedures, safety certification, landlord insurance and detailed financials ready to share. These prove that you understand your responsibilities and that adequate protections are in place.
  • Get agent support: Seek assistance from a letting agent when applying. They can advise on current local rental demand projected yields and prepare professional tenancy agreements. This provides extra assurance and credibility for lenders.
  • Allow ample time: While some lenders may only take a couple of weeks, a consent application can take over a month in some cases. Account for processing times so tenancies can start on schedule.
  • Be ready to switch deals: Expect to change your mortgage product to a buy-to-let alternative when seeking consent. Factor in any extra lending costs so they don’t come as a surprise.

Needing consent from your existing lender before renting your property is typical for standard residential mortgages. While an extra step, gaining consent is manageable for most borrowers who meet critical lending criteria.

With prudent planning and preparation, consent to let remains attainable from high street banks and building societies today. So don’t allow needing permission delay your plans if circumstances require renting out your property for a period.

As an alternative option, you may decide to sell a tenanted property. Click on the link to read our blog about this subject.

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