Can a First-Time Buyer Rent Out Their Property in the UK?
A first-time purchaser can indeed rent their property out in the UK, but only under certain conditions. This depends on a number of factors, including the type of mortgage, lender approval, regulations, and financial viability.
First-time buyers often purchase a smaller home as a stepping stone to the property ladder. Over time, circumstances change. It may be necessary to move for work, to live with a partner or to travel abroad. Renting out your first home can be a good option in these situations.
Important: Renting is Not Allowed Automatically
Renting is not allowed automatically because the majority of first-time home buyers have a residential mortgage. If you rent without permission, you may be in breach of contract with serious legal and financial consequences.
This guide will explain what you are allowed to do, how lenders evaluate your application, and what routes are available so that you can fully understand the risks before becoming a landowner.
What is a First-Time Buyer Mortgage?
First-time buyers are defined as those who have never owned a property in any part of the world. This includes residential and investment properties. Commercial property, such as an office or shop, does not exclude you.
The Financial Conduct Authority (FCA) regulates residential mortgages. The regulation is in place because the loan will be used for owner-occupation and not to generate rental income.
Key Characteristics of First-Time Buyer Mortgages
- Minimum deposits can start as low as 5-10%
- Credit checks and full affordability
- You must own the property as your main or only residence
By signing the mortgage contract, you agree to not rent out the property without the lender's approval.
Can You Rent Out Your First Home While It's Still Mortgaged?
It is Possible, But Not Automatically
You must modify the terms of the mortgage if your home is still under residential financing. You can do this in four different ways:
Get a Consent to Rent
Temporary permission from your lender to rent out your property without switching mortgage types.
Change to a Buy-to-Let Mortgage
Switch your residential mortgage to a buy-to-let mortgage for long-term rental arrangements.
Remortgage to a New Lender
Move your mortgage to a different lender that offers buy-to-let products.
Rent the Property in Part (Lodger's Route)
Take in a lodger while you still live in the property - this usually doesn't require consent to let.
Each option has a different level of risk, cost and lender scrutiny.
Residential Mortgage vs. Buy-to-Let Mortgage
Residential Mortgage (Buy to Live)
Residential mortgages are designed for those who own and live in their property. It is:
- FCA regulated
- Based on your personal income
- Buy-to-let offers lower interest rates than traditional buy-to-let
- Not intended for rental profits
Renting without permission can be considered as a change in risk.
Buy-to-Let Mortgage
Buy-to-let mortgages are designed to finance rental property and are assessed differently.
- Interest rates and fees are increasing
- Deposits range from 25% to 40%
- Rent, not salary, is the basis for calculating your income
- The loan-to-value (LTV) test and the interest coverage ratio (ICR) test apply
Most buy-to-let mortgage lenders usually require the rental income to be at least 125% of the monthly interest-only repayment.
Is it Possible to Rent Out a Property That Has a Residential Mortgage?
No, Not Without the Approval of the Lender
Renting out your house without:
- Consent to Let, or
- Buy-to-let mortgage
You have breached the mortgage contract.
Possible Consequences Include:
- Interest rate increases retroactively
- Immediate repayment demands
- Refusal to accept future mortgage products
- Repossession is only possible in extreme cases
What is Consent to Lease?
A consent-to-let agreement is a written, formal agreement that your lender provides, allowing you to rent out a residential home temporarily without switching to a buy-to-let mortgage.
This is a common expression used by:
- Accidental landlords
- Short-term relocation of homeowners
- People who are waiting to sell their home or remortgage
- Borrowers who work abroad
The mortgage type is not changed by consent to let, only the occupancy rights.
How Lenders Evaluate Consent to Lease Applications
There is no universally accepted approval criterion. The decision to rent is completely discretionary.
Lenders Typically Evaluate:
- Duration of time with lender (usually minimum 6-12 months)
- Mortgage Payment History
- Equity Level (often 20-25%+)
- Renting for a reason
- Expected rental income
- Terms of the Tenancy Agreement
- Insurance Compliance
A lender may refuse consent even if the criteria are met. This is because it changes the original agreement.
Consent can be granted for 6-24 months, and restrictions may apply:
- Tenant numbers
- Rent level
- Property Use
Costs Associated with Consent to Lease
The cost of a mortgage varies depending on the lender and product but can include:
Potential Costs
- Interest rate loading (typically +1-3%)
- Fee for consent (£150 - £300)
- Administrative fees
- Landlord Insurance (£170-£200 annually)
- Tax on rental income (after allowance of £1,000)
Rental income must be declared by self-assessment.
Consent to let: Risks and Rewards
Benefits
- Paying two mortgages is not necessary
- Short-term flexibility
- The existing mortgage structure is retained
- Tests to determine if a landlord is suitable
Disadvantages
- Interest rates on higher loans
- Approval time-limited
- Tenant void risk
- Legal responsibility for the landlord
Switching from a Buy-to-Let Mortgage
Lenders usually require that you switch to a buy-to-let mortgage if you intend to rent out your property for a long time.
This is often the case when:
- Purchase of a new primary residence
- Move in with your partner
- Renting for an indefinite period
- The consent to let is refused
Buy-to-Let Lending Metrics
Lender's Assessment Criteria:
- LTV - maximum 75%
- Rent should be less than or equal to a 125% interest coverage ratio (ICR)
- First-time landlord risk profile
First-time landlords face higher risks, which means stricter criteria for them and higher deposits.
The Costs of Switching from Buy-to-Let to Rent-to-Own
Other costs include:
- Early repayment charges
- Valuer or surveyor fees
- Stamp duty rates increase
- Licence fees (where applicable)
- Costs of maintenance and compliance
- Capital Gains Tax (CGT) on Sale
Alternative Option: Renting Rooms (Lodger Route)
You May Be Able To:
- You can take in a guest
- Rent a Room Scheme: Earn rental income
- Avoid consenting to a remortgage or letting
Renting is the most risk-free option, but it depends on your mortgage and insurance terms.
What Happens If You Rent Without Telling Your Lender?
Renting Without Prior Approval is a Breach of Contract
Lenders may:
- Interest Rate Increase
- Refunds are due immediately
- Refuse to remortgage
- Start repossession proceedings
Final Summary: Can First-Time Home Buyers Rent Their Property Out?
Yes, But Only If You Use the Correct Structure
- Short-term rental - Consent to Let
- Long-term renting - Buy-to-let mortgage
- Lodging on property - A good option for those who want to live in a home
Before making any changes, it is best to consult a mortgage specialist. Lender criteria can vary greatly, and making the wrong choice could be expensive.
If you do it right, renting your first house can be a great way to make money.
FAQs
Yes, first-time buyers can rent their property out legally, but only with permission from the mortgage lender. The majority of first-time home buyers have residential mortgages, which do not permit renting. To rent out your property, you must obtain consent or switch to a mortgage for buy-to-let.
A mortgage contract is breached if you rent out your property without the lender's approval. The lender can:
- Reverse your interest rate increase
- Require immediate repayment of the loan
- Reject future mortgage products
- In serious cases, begin repossession proceedings
Your home insurance can be invalidated as well.
No. The consent to let is discretionary even if all requirements are met. Lenders are entitled to refuse consent if they feel renting will change the risk profile for the loan.
Consent to Let is usually granted for 6-24 months. This is a short-term solution and not a long-term rental agreement. Most lenders will insist that you get a buy-to-let mortgage if you plan to rent for an indefinite period of time.
Often, yes. Most lenders will add a rate loading between 1% and 3% to your current residential rate. Some lenders will also charge an administration fee.
Consent to Let allows you to rent out your home temporarily while still keeping your mortgage. Buy-to-let mortgages are designed for long-term rentals and assessed on rental revenue, loan-to-value (LTV), and interest coverage ratio (ICR), instead of your salary.
Most buy-to-let lenders require that rental income covers at least 125% of the mortgage interest-only payment. The interest coverage ratio (ICR) is used to make sure that the mortgage payment is affordable even if rates increase.
Stricter criteria are often faced by first-time landlords. Lenders may require:
- Deposits (often up to 40%-75% LTV)
- Rents are in high demand
- Credit history
A specialist mortgage broker will improve your chances of approval.
Yes. Once tenants move in, standard home insurance is usually invalid. You will need insurance to cover property damage, liability, and lost rent.
Yes. If you are renting out your property, the rental income is taxable. You must declare it via self-assessment. The first £1,000 may be exempt from tax under the Allowance for Property Income. However, anything above that is taxable according to your marginal rate.
You can take on a tenant if you are still living at the property. This does usually not need consent to let, and you may be able to qualify for the Rent a Room Scheme.
You must follow the following rules, even if you are a new landlord:
- Gas and electrical safety regulations
- Energy Performance Certificates (EPC) are required
- Tenant deposit protection schemes
- Local licensing rules
If you do not comply, you may be fined or face legal action.
Yes. Some lenders restrict:
- Number of tenants
- Tenancy agreements can be classified into two types: Type A and Type B
- Rent level
These conditions are usually written in the consent-to-let agreement.
It is best to talk to your mortgage broker and to your lender prior to renting. This will ensure:
- Your contract compliance is important
- Choose the right mortgage route
- Avoid costly mistakes
You can, but only if your rental income is sufficient to cover the costs and risks. Before committing to a long-term investment, it is important to carefully consider factors such as maintenance, taxes, mortgage rates, and void periods.
Need Help Renting Out Your First Property?
Let Tapton Capital help you navigate the process of renting out your first property. Our specialist team can provide expert advice on consent to let, buy-to-let mortgages, and help you understand all your options and legal requirements.
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