How to let out your own home safely.

November 11, 2013

There are many occasions when renting out your own home (instead of selling it) makes sense:

  • You have been re-located for work.
  • You have met a partner who also has a property and want to move into their home.
  • The sales market is weak and you fear that you will not achieve the market value of the property.
  • You are working abroad on a contract.
  • You want to move to a bigger/smaller property and like the idea of keeping your existing property as an investment.

When renting out your property, there are a number of considerations to take into account to ensure that you are a compliant landlord:

1.  Get “consent to let” from your lender

A residential mortgage is a completely different financial product to a BTL mortgage.  Residential products fall under FCA regulations, whereas BTL is un-regulated.

In order to let your property out and not be in breach of the T & C’s of your residential mortgage, you will need to apply to your lender for what is known as “consent to let”.

If the lender agrees to your property being let out, they may impose a higher interest rate, or a fee.

The lender may refuse to grant “consent to let”, in which case you will need to re-mortgage to a BTL mortgage. Typically, the maximum loan to value is 75% and the rent will need to cover the mortgage by 125% in order to meet BTL lending criteria.

2.  Check your lease

If you live in a leasehold property, you will need to check your lease to see if it has any clauses that do not allow you to sub-let.  The headlease will specify whether you will have to gain permission from the freeholder or their managing agent to sub or under-let. They will generally require a fee for granting consents and in some cases special conditions may be imposed that may need to be reflected in the tenancy agreement.

3.  Insurance

You will require specialist insurance for your property as your home insurance will not cover a tenant using the property instead of the owner.  There are many landlord insurance specialists who offer insurance, and make sure you also take our landlord insurance that covers you against third party claims.

If your property is let unfurnished, there is no need for contents insurance.

4.  Legal compliance

You have many legal responsibilities to comply with as a landlord, including:

– Providing a compliant Tenancy Agreement, usually an Assured Shorthold Tenancy agreement.
– Providing an Energy Performance Certificate for the property.
– Providing a Gas Safe Certificate.  An annual gas safety check must be carried out on every gas appliance/flue. A gas safety check will make sure gas fittings and appliances are safe to use.
–  Ensure that any furniture you supply meets current fire safety standards.

5. Understand your tax position

You will need to declare any income from your rental property to HMRC on a Self-Assessment tax form each year.

You are entitled to claim certain expenses back to help mitigate your tax bill.  These include, for example, mortgage interest payments, if you have a buy-to-let mortgage, letting agent fees and maintenance costs.   Seek advice from an Accountant if in any doubt.

For a summary of what is involved in letting out your property, visit the Money Advice Centre.

6.  Get the property let 

When letting out their home as their first rental properties, many landlords prefer to employ a lettings agent to find a suitable tenant and take over the management of the property.  This includes *among other things) undertaking an inventory to protect your property, registering the tenant’s deposit correctly, issuing a tenancy agreement, having a Gas Safety Certificate done, and dealing with maintenance issues as they arise.

Northwood’s Guaranteed Rent Scheme was designed for just such the situations we listed above, and allows busy landlords to transfer the  financial risk  from you to the agent.  Additionally, all Northwood offices are locally owned and run meaning you have the peace of mind of knowing who you’re dealing with during the life of the tenancy.  Northwood agents are committed to supporting landlords through every aspect of the tenancy, and that, along with our Guaranteed Rent, can take away the usual landlord headaches and worries.

Furthermore, all Northwood offices are registered with the Property Ombudsman and have client money protection, Northwood being a founder member of SAFEagent, the signpost to agents with recognised client money protection in place.

In this short video, Nick Harris of Northwood explains why so many novice and “accidental” landlords choose to let through Northwood:

With the recent news that lenders are cracking down on accidental landlords who have let out their property without permission, it’s important that you take the necessary steps to create a compliant rental property and do not fall foul of a breach of your mortgage terms and conditions or other issues highlighted above.

Northwood is one of the largest and most recognised lettings agents in the U.K. and the leading supplier of Guaranteed Rent to give landlords complete peace of mind.

Find us on Twitter @northwoodUK or visit our YouTube Channel.

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