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- Renting out your first home is possible, but if it’s mortgaged, you’ll need ‘consent to let’ from your lender. Renting without consent is considered mortgage fraud.
- ‘Consent to let’ is temporary, usually 1-12 months. Afterward, you may need to switch to a buy to let mortgage, which requires a minimum 25% deposit and other criteria to be met.
- Alternative rental options include taking in lodgers (benefiting from tax-free income up to £7000 annually through the Rent a Room Scheme) or converting the property into a profitable holiday let.
If you’re eager to get invested in property, you may be wondering whether you can rent out your first home. After all, it’s better to have an asset than a liability – not to say that your residential home is a liability, if it’s in a good location, it will still appreciate in value and likely quite handsomely too. Nonetheless, the idea of making an income from your first property is quite appealing and more importantly possible.
Realising that this is quite a broad question, let’s look at the options depending on your circumstances. Feel free to skip to whichever section sounds most relevant to you.
Can You Rent Out Your Residential Property?
If you’re looking to rent out your residential property, a.k.a your home, you’ll be glad to know that it is possible. However, how you go about renting it out will depend on whether you have a mortgage on the property or not. If you don’t, the property is all yours and you can do with it whatever you want. On the other hand, if you own the property via a mortgage, you will need to ask your lender for permission to let the property – this is called ‘consent to let’.
You may be wondering what’s the point of asking for permission – what difference does it make to your broker, they’re going to get paid either way. It’s important that you seek permission because renting out your property whilst on a residential mortgage would be considered mortgage fraud – this is a criminal offence punishable by 1 to 10 years in prison. So be sure to ask for permission first!
What Is Consent To Let?
Consent to let is pretty much exactly what it sounds like – it’s permission from your mortgage lender to rent out your property. However, this is a temporary permission and only meant for people who suddenly find themselves having to move elsewhere, whether that’s for work or family related issues – you will only be allowed to rent your house out for 1 to 12 months. Sometimes, they may allow you to rent it out until your current mortgage product runs out – however, this is a rare occurrence.
After the consent to let period comes to a close, you will either be expected to move back into the property or remortgage onto a specialist buy to let product meant for rentals.
Buy To Let Mortgages – Quick Summary
If you wish to continue renting out your property, you will have to find a buy to let mortgage (we’d recommend using a specialist broker such as Lendlord). It’s important to note that these mortgages differ from residential ones – we discussed this topic in far more detail in our investment property buying guide but for the purposes of this article, let’s keep it short and sweet. The main differences are:
- The minimum deposit is 25% for a buy to let mortgage.
- It’s preferred that you already own another property so if you’re looking to rent out your house, you may need to purchase another property to move into in order to meet this criteria.
- You will need to meet rental coverage criteria (this is how many times your rent covers the mortgage payments at an inflated rate).
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Other Ways To Rent Out Your First Property
If you’d like to continue living in your property or you don’t want to get a buy to let mortgage for it, there are still some ways in which you can rent your house and make an income from it.
Rent To a Lodger
If you have a room or two that aren’t being used and you don’t mind sharing your house with other people, you can rent those empty rooms to lodgers. Whilst this may not seem like the most appealing option because you’d be sharing your house with someone else, it’s worth looking into for several reasons: it’s a great source of income, it’s tax friendly and you wouldn’t have to change your mortgage type (although, you should still ask your mortgage lender if having a lodger is okay). If it’s a leasehold property, you may need to ask the leaseholder as well.
Source of Income – renting out, even a single room, in your property would likely help you pay off the majority of your mortgage payments.
Tax Friendly – Another advantage of lodgers is that the government allows you to earn tax free income from renting out spare rooms in your property, up to £7000 a year (as part of the Rent a Room Scheme).
Convert Your Property To a Holiday Let
Another option could be to convert your property into a holiday let. According to Syke Cottages, you will likely require a specialist holiday let mortgage product so this may not be the ideal solution for you if you don’t want to change mortgages. However, it’s definitely worth running the numbers as holiday lets can be incredibly profitable.
Final Thoughts
As you can see, there are many options for first time buyers looking to rent out their properties – both as short-term and long-term rentals. No matter what option best suits your personal preferences and goals, it’s important that you have a good understanding of how buy to lets work. We’d recommend checking out the buy to let guides for beginners on Amateur Landlord to boost your property investing knowledge.
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Victor Sterling
Hi, my name’s Victor - I’ve been investing in property for three years now, with my preferred strategies being buy-to-let, BRR and house flips. My goal with Amateur Landlord is simple - to provide beginners with easy-to-follow resources that simply weren’t around when I started, and to offer these for free and without ads.