Most mortgage lenders expect their customers to tell them if they are planning to let out their property and will often increase the mortgage rate once permission is granted.
Aaron Strutt, product manager at Trinity Financial, says: "Some mortgage lenders are happier to give permission to let than others and a few of the building societies will hike the pay rate by 2% if they discover a residential property is being let without their consent.
"If you are planning to let your home in order to buy a new property, it may be worth considering a let to buy mortgage. This will enable you to release equity from your existing property to put towards your new purchase, you will also be able to keep your existing property as an investment."
Some lenders permission to let policies are better than others:
- Clydesdale Bank did not previously give any of their customers permission to let their property, they required their borrowers to switch to a buy-to-let mortgage and pay any early repayment charge attached to the mortgage. Thankfully, they have changed this policy. They will now potentially give consent to let for up to two years and increase the rate by 1%. There is also a £100 administration fee.
- Chelsea Building Society will grant permission to let, although they will increase the rate by 1%. If the lender finds out that any of their customers are letting the property without permission, they will increase the rate by 2%.
- Halifax is likely to explain to their existing customers sitting on the standard variable rate, that the rate will increases from 3.99% to 5.49%. This rate is likely to change for customers on a fixed or tracker rate.
- Accord Mortgages expect borrowers to apply for permission to let and agree to their terms for an authorised let. They will increase the interest rate by 1% and charge an administration fee of £85. However, when a mortgage account holder lets their property without permission, they will hike the interest rate by 2%.
Virgin Money ask existing customers to apply for consent to let by completing their form and paying a £250 fee. They will not increase the rate. After 12 months, if customers are still letting out the property they will need to apply again for permission to let.
There is no guarantee they will be accepted and if they are declined they will need to remortgage away to a buy-to-let lender. Existing customers cannot access Virgin™s new customer buy-to-let rates.
- HSBC does not charge existing customers or even increase the rate if they want to let out the property. Although, after a year, they would like to be told.
- Nationwide Building Society allow the property to be let for six months free or change, but after this period they will increase the rate by 1.5%.
- Santander charges a £295 administration fee if you would like to let your property, although they expect you to have owned it for at least six months before they give permission to let.
If you would like help to secure a buy-to-let mortgage or to discuss a let to buy deal, call us on 020 7016 0790.