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Can I rent my house out if it’s mortgaged?

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Can I rent my house out if it’s mortgaged?

Wondering whether you can rent your house if its mortgaged? The short answer is yes, however you must let your mortgage provider know about the modification. Serious consequences may result from not doing so. Let’s review what you must do with your house and how doing so may impact your financial situation.

Inform your lender

Situations in people’s lives change. You might be moving in with a partner while still unable to sell your current house while it is still mortgaged, or you might be relocating for work but want to maintain a presence in the housing market. Whatever your motivation for seeking to rent out your mortgaged property, the most important thing you must do is request “consent to let” from your lender.

You will constitute a breach in terms of your mortgage if you don’t do this and are found out.

If your lender is willing to agree, there may be additional requirements. Due to the property’s altered use, you could end up paying a higher rate. Additionally, there can be administrative expenses associated with the modification. Since every lender has a distinct policy, it is wise to ask yours what it is.

Buy-to-let mortgages

You could be interested in thinking about a buy-to-let mortgage initially or as a potential alternative to transfer to once your present mortgage term expires, based on what occurs after you inform your lender of the change in status of your property.

Landlords are the target market for buy-to-let mortgages. Since they are more likely to have void periods (when there is no rental income due to the lack of tenants), which are thought to constitute a danger to repayments, they often have increased rates than residential mortgages.

Tax and insurance

Beyond your mortgage, renting out your home has other drawbacks. It is advisable to be aware of your tax obligations for capital gains and income tax. A self-assessment tax form must be filled out for each rental income source. You might be able to deduct some costs from your rental revenue to lower your tax obligation. Additionally, you could be able to benefit from the property income allowance, which allows property owners to earn up to £1,000 in rental income annually tax-free.

If you are looking to become a landlord with an existing property, James Douglas will be able to advise the best course of action as well as providing you with a rental valuation. Contact us here or find out what your property is worth via our online valuation tool.

Rebecca Trattou