People who are struggling to sell their home may be tempted to rent it out for a while. Many mortgages have conditions that disallow renting, which means that homeowners need to switch to a buy to let mortgage.
Some lenders will provide a “consent to let” for a temporary period but may charge extra interest. Most consent to let periods are 12 months or less.
Some lenders have mortgage products available for so-called “accidental landlords” that did not buy their property with the intention to rent it out. These mortgages are sometimes called “consumer buy to let mortgages” and are only available to people that do not own another buy to let properties.
To qualify for a consumer buy to let mortgage, rents need to cover between 125% and 145% of the mortgage repayments. You need to also show that you are not relying on the rental income to fund your lifestyle. A mortgage broker can arrange these mortgages.
As a landlord, the homeowner has obligations and must comply with legal regulations that cover how to handle deposits and safety issues. The existing home insurance is unlikely to cover renting, so landlord insurance is required. Rental income is taxed, so must be declared to the tax authorities. There may be some tax relief available on mortgage interest payments.
If you need to rent out your home, firstly get expert advice from a mortgage broker. They also arrange bridging finance if you are buying a new home before your existing one is sold.