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Can I let my property without a buy to let mortgage?

The question posed in the title of this article is a little ambiguous. But, in theory, the answer is yes. You could let your property without a buy to let mortgage. But the reality is that if you are doing so you are highly likely to be committing mortgage fraud. Though probably unwittingly.

However, landlords have in the past purchased their properties with residential mortgages. No doubt some continue to do so. This is a deliberate attempt to avoid a buy to let mortgage. But other 'accidental landlords' can also find themselves in a position where they're letting a property on a residential mortgage.

What are accidental landlords?

An accidental landlord is someone who purchased a property to live in. But at some point decided to rent it out. This could be because of a change in circumstance; a move away to another area, a divorce or being stuck in negative equity and unwillingly to sell. Any of those scenarios create an accidental landlord. And accidental landlords will usually have a residential mortgage.

The differences between a residential and buy to let mortgage

You have a residential mortgage when you buy a property to live in. But if you are purchasing the property with the intention of renting it out you should have a buy to let mortgage. The two mortgages are very different.

The biggest difference is cost. Residential mortgages are cheaper. The interest is lower, there are fewer fees and the deposit smaller.

Does it matter which mortgage I have?

Unfortunately, it does. If you are renting out a property on a residential mortgage you will be breaking the terms of your loan. And whether you are aware of it or not you could be committing mortgage fraud.

OK. I have a residential mortgage. What do I do now?

You need to inform your lender. When you do your lender may insist you switch to a buy to let mortgage. This means your monthly payments will increase though hopefully, the rent you are receiving will still cover them. The lender is also highly likely to charge you an administrative fee for switching mortgages.

However, some lenders will consider granting a 'consent to let.' The terms of this vary between lenders but usually mean you are able to carry on renting your property for a limited time without affecting your current loan agreement.

Are there any consequences in letting a property without a buy to let mortgage?

There can be serious consequences to not having the correct mortgage in place. If your lender discovers your property is being let out they could decide to:

  • Automatically transfer you to a buy to let mortgage.
  • Charge extra fees or penalties.
  • Ask you to immediately repay your mortgage in full.

Another thing you should be aware of is that your landlords insurance will probably be invalid. If anything happens and you try to make an insurance claim while only having a residential mortgage the claim will undoubtedly be rejected.

Whether you are an accidental landlord or have been a little less than honest with your lender you should ensure you switch to a buy to let mortgage immediately. And avoid any financial consequences.

If you are a buy to let landlord you list your property with MakeUrMove to quickly find the best tenant for you.

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