Any landlord who has failed to notify their bank that they are letting out a property should be aware that mortgage lenders are taking steps to track them down. Often these are so-called accidental landlords, those who have been unable to sell a property and who may be unaware of the regulations in the private rented sector. It is almost certain that the terms of any residential mortgage will insist on informing the lender if you decided to rent out the property. And according to the Daily Telegraph, lenders are now trawling the electoral register, social media sites and online letting agencies for those who have not done so.
Rentify strongly encourages all landlords who have overlooked this step to inform their lenders now. You’ll need ‘consent to let’, which will involve paying a fee, a higher rate of interest or both, or you could switch to a buy to let mortgage. The higher costs reflect the assumption that a rental property is higher risk due to the possibility of void periods and arrears. But the alternative if you breach the terms of your mortgage could be much worse, even a demand for full and final repayment. And as far as the image of the private rented sector goes, the best landlords can do in this situation is to follow the rules.
There are of course those accidental landlords who know they must inform their lender, but who choose not to. While we strongly warn against this, given the possible penalties, it’s easy to see why it’s not uncommon. It could well be argued that the increased rates and charges are overly punitive. We can accept there may be increased risk to the lender, but a homeowner who wants to sell but is letting the property for a short time to keep up the mortgage payments is actually taking steps to reduce the risk to the lender. Should they really be punished? Unfortunately, some people will read the headlines and see evidence of unscrupulous landlords, dodging fees and breaking the terms of their mortgage, when in fact the lenders have more to answer for themselves in punishing honest and pro-active borrowers.