Re. Permission to rent out my house

[HooverFairy]

I have a house that I no longer live in, I can't afford to sell it as it's in negative equity and I can't change my mortgage deal (or company) because of this. I want to rent it out so that at least it won't be costing me the amount of money it currently is. I read that I must have either permission from my mortgage company to rent it out on a short term basis or that I must change my mortgage to a Buy to Let mortgage which is a higher interest rate. My mortgage company charges £300 to apply for permission and then a £200 per annum fee for each year that the house is rented out. I'm skint, I can't afford a higher interest rate and I'm worried that if I apply for permission then it will be turned down and I'll not only have wasted £300 but I will not be allowed to rent it out.

AIBU to rent it out privately and not tell the mortgage company? I already have the correspondence address as my parents address from when I actually lived in the propery (complicated address, post would end up with a neighbour who stopped passing it on even though it was correctly addressed) so their method of contacting me would remain the same.

If you still officially live there could you get a lodger under the (tax free up to about £4200 p/a) rent a room scheme?

Where are you living at the moment, because to me it seems silly to be living else where when you have a house you are paying a morgage on.

if you declare to your insurance company that you live in the property and they find out that youre renting it out they can cancel the policy or refuse to cover claims

I was told (so heresay, therefore maybe incorrect) that my friend's house was taken by their mortgage company as they were renting it out and didn't have a buy to let mortgage. It was definitely repossessed, but the reason could be incorrect or though likely.

I was in a similar situation last year, where I could not sell my house and wanted to rent it out as I had relocated. My advice is to contact the mortgage company and see if you can negotiate a deal with them about the permission fee for consent to lease, ie can you pay them either after the first months rent comes in or to put it on your mortgage (although that is more expensive)? Tell them the truth that you can't afford to pay them. My mortgage lender was very helpful and gave lots of advice and options on how I could pay them back.

Seriously, you absolutely need to tell your mortgage company. Failure to tell them means that you are in breach of your (legal) contract with them. You also have to let your insurance company know so that they can either convert policy to a landlord's insurance or to cancel it so you can get a more competitive LL elsewhere.

Actually there are a lot of upfront costs associated with property rental that you need to be aware of.

Btw, if you rent it out, you wont need to afford a higher buy to let mortgage as the rental income should pay for the mortgage.

I've recently done this and the consent was really easy, just filled out a one page form explaining why I wanted it (moved to partners house, would lose money if i sold mine due to change in house prices), and it came back by return of post. Didn't pay anything until the consent was granted, it sounds weird that you're expected to pay when you apply - you may want to check if that is correct?

Landlords insurance requires you to have permission from your lender on most policies. If you care caught lying and they invalidate your insurance then on every other insurance policy you need in future and running currently you will have to declare that you have been invalidated in the past. The knock on effect is that many insurers wont then touch you and those that will consider cover do so at a premium.

If you cant afford the extra on the mortgage, how do you propose to make any repairs etc that the tennant needs doing urgently. What if the boiler breaks down?

You either need to move back in, rent out properly and ensure you have a fund for repairs or sell and take the hit on the negative equity and agree a repayment schedule with the bank.

I've had this dilemma. I played it safe and didn't let, as my bank company insisted on a buy-to-let mortgage. The temptation to let anyway was overwhelming (as most of us hate banks!)

You need to go for permission as you have no equity to enable a BTL. However if money is that tight I'm not sure who you are going to afford ongoing costs like safety checks and maintenance or interim periods of unoccupancy.

You could live in it and get in lodgers? That's one way round the insurance thing.

If you're skint how to you propose to fund the maintenance of the house if anything goes wrong while the tenants are in there? Unfortunately you said like another nightmare dodgy amateur landlord in the making.

We've just done this, and a lot of people said why are you bothering - but I wanted to do it all properly and above board. I don't want to be worrying if the mortgage company were going to catch me out.

All expenses like this are deductible for tax, but agree with talking to the mortgage company too see if they can help. It does seem an awful lot - I paid a £30 fee for 2 year consent to let, and a 1.5% increase in interest (to offset the tax benefit).

But you have to make sure you can cover all the costs associated with renting a house - we've taken out Landlord insurance. Plus our new house we are renting is less than half our rental income from our old house so we are saving that for any expenses we may incur in the meantime.

Hooverfairy,
I've twice moved out of a house I owned and rented it out while away. On both occasions I had no intention of moving back in because I needed to travel for work and so rented elsewhere as needed until buying a new place when I settled for long enough. I had tenants and the rent more than covered my mortgage. Both times I told the mortgage company (different mortgages, different banks) and never got charged anything in addition and was not asked to change the terms of my mortgage.

We told the mortgage company that we were going to be renting for a while as we had to relocate and the equity was not enou to sell, they were fine about it, wrote to confirm, no charges at all.

We did this by accident a few years ago. Got work in another city so rented out the property. Never occurred to us we couldn't . Don't know how, but the bank found out. We got a letter saying 'We have reason to believe you are renting out x property. this is a breach of the mortgage conditions. Please contact us immediately or we will cancel the mortgage etc'

We called and sorted it out. fortunately all they needed was notification from us and us to change our insurance. We didn't pay any more or anything. But the contents insurance was invalid and we had to get just buildings ins for collision and fire. Which actually went down from £30 to £19 per month.

We now rent it again and have done the same. I don't think it's worth the risk of not doing it. I would also get renters ins in case you need any repairs or legal fees if you get bad tenants.

Sorry. It's a shit situation to be in. :(