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Consent to Let mortgage & Covid-19

by Sam Thomas — Posted on 13 April, 2020

Obtaining consent to let from your mortgage lender following the coronavirus pandemic and advice on buy to let mortgages   

Coronavirus and consent to let

Sadly, the coronavirus pandemic (covid-19) may have forced you into a problematic situation where you have been forced to move out of your home either due to financial pressures or because of government isolation rules. The good news is that lenders are offering mortgage payment holidays allowing you to stop temporarily paying your mortgage. However, this does not permit you to rent out your property without your mortgage lender’s consent. We hope this blog will give you a clear understanding of what is generally required from lenders for them to grant you consent to let. During these difficult times, we are happy to offer a no obligation chat over the phone to guide you through the process. We can look at all options including switching your deal to a buy to let mortgage in the event your lender does not agree to give their consent to let. Our mortgage advisors continue to work at home and you can call them on 0208 840 6640 (option 2) or email mortgages@starckuberoi.co.uk  to arrange a call back.

For more information on mortgage payment holidays click on the link to your lender:

Nationwide

Halifax

Santander

Barclays

HSBC

NatWest

The Mortgage Works

 

What is a Consent to Let?

Consent to Let is an agreement between a homeowner and their mortgage lender that allows the owner to rent out the property to tenants while maintaining the residential mortgage without having to re-mortgage to a buy to let mortgage.

When you take out a residential mortgage one of the requirements stated is that you have to inform your lender if you plan to rent out your house to tenants, failure to do this may result in the mortgage lender viewing the situation as attempted mortgage fraud and/or a threat of repossession, this is where Consent to Let mortgages can help.

 

Circumstances where Consent to Let may be needed

Aside from the implications of covid-19, Consent to Let is normally used in circumstances where the homeowner is moving further away for career related reasons and are looking to cover mortgage payments by renting the property.

Other circumstances where Consent to Let may be necessary are if the homeowner has bought a new house and has been unable to sell their existing home at the same so needs to rent it as a temporary measure.

However, it is important to note that as the landlord of the property you rent, you will have to meet obligations for inspections, repairs or general maintenance while it is still registered under your name. Your lender may also require you to take out a buy to let buildings insurance policy. More detail on lender requirements are set out below.

 

Mortgages Lender conditions to obtain a Consent to Let

Lenders often require certain conditions to be met before a they allow a homeowner to take out a Consent to Let mortgage. You should call your lender to get details of their specific requirements, but they often include the following:

  1. Time with the lender
  • Often there is a limit on the amount of time the Consent to Let mortgage is valid for before the lender reviews it, normally this is 12 months but depends on the lender.
  • In order to gain permission for a Consent to Let, lenders state you have already got a mortgage deal with the lender for a certain amount of time, usually more than six months.
  1. Equity
  • Lenders may require a certain amount of equity to be in your home as the income from the rent should cover the mortgage costs.
  1. Income
  • There may be a minimum income that you have to have in order to be eligible for a Consent to Let mortgage however, this is dependent on the lender’s specifications.

 

  1. Help to buy and shared ownership
  • If you have these types of mortgages lenders often recommend that you convert to a normal residential mortgage before changing to a Consent to Let, this can be done by either repaying any shared equity or loans on the property.

 

  1. Tenancy Agreement requirements
  • Your lender is likely to require you to enter into a formal tenancy agreement (as opposed to an informal verbal agreement) with your tenant:
  1. Tenancies must be Assured Shorthold Tenancy agreements (AST) that comply with the Housing Act 1988
  2. If you own a leasehold flat, depending on what your lease says, you may need to obtain written permission to rent your flat from your freeholder. If your lease does not permit you to sub-let your flat, you will need to agree a deed of variation to your lease with the freeholder. You can read more on this in our blog, Deed of Variation of lease for your flat.
  3. The tenancy agreement must include terms that the tenant maintains the condition of the property and only use it as a private dwelling
  4. You, the landlord must inform the tenant that:
    • the property has been mortgaged
    • the mortgagee can take possession of and sell the property
    • the mortgagee has power of sale
    • they will be given 2 months’ notice to vacate the property in the event of a possession
  5. You, the Landlord must comply with all relevant legislation and regulation required to let a property e.g. Tenancy Deposit Scheme registration with prescribed clauses, valid EPC and gas safety certificate and service of how to rent guide. For more information on your requirements, read our blog on Section 21 No Fault Notices & Possession
  6. If a tenant breaches the terms of the tenancy agreement, there must be arrangements in place to terminate the tenancy at the end of the letting or earlier

 

How long is a Consent to Let valid and what happens when the mortgage term ends?

Consent to Let mortgages are only usually valid for a limited time. Most lenders give 12 months; however, this may differ lender to lender.

Because of the short-term nature of Consent to Let mortgages it is important to plan for what to do in the future after it ends. The lender may grant an extension if it is within the mortgage deal term. Alternatively, the lender may offer to convert the Consent to Let to a buy to let mortgage. However, the options available depend on who the lender is as they all have different policies. We are familiar with criteria set by most lenders so feel free to call us if you are uncertain.

 

Can I get a buy to let mortgage if my lender does not agree to give Consent to Let?

There are some circumstances in which a lender may refuse to give Consent to Let. However, if the lender does not give their Consent to Let you may be wondering what your options are or how to proceed?

One of the options you may consider is re-mortgaging the property with a Buy to Let mortgage with another lender. If you let without permission, you would breach your mortgage conditions and your lender can take action against you which could include repossession.

The reason you need a Buy to Let mortgage is because lenders have to accurately measure their risk when deciding to lend. Buy to Let mortgages are seen as higher risk than normal Residential mortgages because most landlords rely on rent collection from tenants to pay the mortgage. This also means you may only able to borrow up to 75% of the property value, compared with up to 95% on a standard Residential mortgage.

The mortgage balance and your cash reserves all need to be taken into consideration before you decide if a Buy to Let mortgage suits your needs and our mortgage advisors are qualified professionals that can help provide information so you can make the right choice for you.

Taking out a Buy to Let mortgage means you are able to rent out the property whilst also remaining in compliance with mortgage conditions set out by your lender. Most Buy to Let mortgages are on an Interest only basis which means payments only cover interest however, you are able to make overpayments to a certain limit to reduce the overall mortgage balance. Usually overpayments on Interest only mortgages allow you to make payments of up to 10% of the mortgage balance each year.

On a legal standpoint, you would need to comply with all relevant legislation and regulations required to let a property under an AST including Tenancy Deposit Scheme registration with prescribed clauses, valid EPC and gas safety certificate in place and service of how to rent guide. For more information on your requirements, read our blog on Section 21 No Fault Notices & Possession

How we can help

We, at Starck Uberoi, always encourage our clients to seek advice before making changes on their mortgages. Our mortgage advisors will advise you what to do when applying for a Consent to Let and will be able to advise you how to proceed with a Buy to Let mortgage should your lender not give consent to let.

The role of the mortgage Advisor:

We, the mortgage Advisors will:

  • Assess your current situation
  • Discuss and consider your future aspirations and contingencies
  • Advise you on the best product available on the market
  • Process your full mortgage application all the way until the offer is received

How Starck Uberoi can help

Our experienced mortgage and Conveyancing team will deal with your matter efficiently to ensure you get the best deal. Our experienced conveyancing solicitors work closely with the mortgage team to provide the most efficient service. For more information, please visit our mortgage or Conveyancing pages, or to book an appointment please call 020 8840 6640. Our offices are based in Brentford, Ealing, Chiswick, Canterbury and London Victoria. For an appointment at any of our offices, email us at solicitor@starckuberoi.co.uk or call 0208 840 6640.

 

Further Reading

About Sam Thomas

Sam Thomas is the senior mortgage advisor of Starck Uberoi Mortgages. Sam first got involved in finance in 2013 with a commercial mortgage packager in a broker liaison role. He qualified in 2014 and has gained an extensive amount of experience at both large master-brokers and small independent firms. He offers specialist advice and has a great reputation of success for his clients.