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Letting out your property could give you the freedom to move on at a time when selling has become incredibly difficult. It can allow you to move and rent elsewhere, or even buy a property without selling your own. But it also turns you into a landlord with all the responsibilities it entails.
You need to get your mortgage lenders consent to let your property - failure to do so could put you in breach of the terms and conditions of your home loan. If you are planning to keep your mortgage as it is, in order to rent out your property temporarily so that you can relocate and rent a home elsewhere, then a lot of lenders may be happy to let you do so.
If you are planning to let out your property to buy another one, however, then you may face greater barriers as you will be taking on two loans, regardless of the fact you plan to have your tenants pay off one of them. In this instance, you may find you need to take out a buy-to-let mortgage. These generally come with higher rates of interest and bigger upfront fees than standard owner-occupier mortgages. The buy-to-let lender will also want to know that the rent you are charging will cover the mortgage interest payments and then some.
Criteria are getting tighter, and while lenders were at one stage asking for rents that cover 100% of interest payments, they are now asking for 125%. You will also need to tell your buildings and contents insurers that you are letting your property. If you do not you may well find that your insurance is invalid.
For further advice, visit our Mortgage Advice page.
Do I need a Letting Agent?
You can let your property privately without the use of a letting agent, but using one has quite a few advantages. They will market the property for you and organise viewings, and get references from your tenants and draw up a tenancy agreement for you.
Depending on the level of service you choose, they will also manage the property and take care of any maintenance issues, dealing directly with the tenant on your behalf. They will also organise rent payments and, of course, levy their fee. These can vary hugely and are dependent on the market, the property and the area it is in, but you can expect to pay 10% of the rent you receive in fees, or around 15% if you opt for a full management service. It is a good idea to make sure the agent is a member of a recognised body. Members of the Association of Residential Letting Agents, the National Association of Estate Agents and the Royal Institution of Chartered Surveyors are all bound by a strict code of conduct.
How much rent to charge
Bakewell & Horner will give you an estimate for the amount of rent you can expect to charge. Bear in mind that tenants may try to negotiate a lower price, so if your mortgage payments are sizeable and your margins close, you need to be careful. And when the market is flooded with rental properties be aware that, just like house sale prices, rental prices can drop.
You should make sure you have a substantial financial buffer in place to cover a "void," or a time when the property is empty between tenants. You need to know that you would be able to meet the rental or mortgage payments on the home in which you are living, as well as the one you are trying to let out.
And, of course, you will still be responsible for the upkeep of the property. Could you cover the cost of repairing the roof or replacing the boiler? If you are planning to buy another property you will then have two roofs, two boilers and double the chance of having to pay out for maintenance.
Further responsibilities Since April 2007, the law has stated that your tenant's deposit must be kept in a government-authorised tenancy deposit protection scheme. It is held there until the end of the tenancy when it should be returned, assuming the tenant has kept your property in good order. The idea is to protect tenants from unscrupulous landlords who blew the money or withheld it unreasonably.
From 1 October 2008 landlords will have to provide potential tenants with an energy performance certificate outlining the energy efficiency of the building. This can be provided by our in-house Domestic Energy Assessor.