Declaring A Buy-To-Let Property As Residential

It’s common practice for landlords to let their property out without informing their mortgage lender. Basically, landlords declare their buy-to-let property as residential. Why do they do it? Generally because residential mortgages have a lower interest rate than buy-to-let mortgages, consequently there’s an opportunity to save thousands over the period of the mortgage. It’s a tempting offer, that’s for sure. It’s not like mortgage lenders don’t rip us off anyways.

Here are two ways landlords’ can breach their mortgage policy conditions with their lender regarding this issue:

1) You could buy a property on a residential mortgage, giving the impression to their lender that they will be the resident, and then renting it out.

2) You could buy a second home with a residential mortgage (which isn’t legit in itself), move into it, and then rent their previous home out, without informing their mortgage lender of what’s happened.

In my opinion, you should ALWAYS inform your mortgage lender of any kind of letting activity, or you will be in breach of your contracted agreement. If you’re buying a property with in the intent to let, then get a buy-to-let mortgage, a similar policy in which your lender allows you to let.

However, if you’ve deciding to let your existing property out, I would recommend informing your lender, and request for a written confirmation.

If you fail to get their written agreement then this will normally be a breach of your mortgage conditions and you could end up in serious hot water. It’s also important to get the confirmation before anyone moves in. If you don’t, you could be breaking your agreement and your lender may be able to take you to court. Letting is not always allowed by lenders, and many lenders refuse to give permission if you have mortgage arrears.

Technically, if your mortgage conditions say that you can’t rent a property out without prior consent and you do, then you are in breach of your mortgage policy and they could repossess. Although, it is extremely unlikely (BUT COULD HAPPEN).

I confess, I have been tempted to pull such a devious act of deceit (yes, even someone as innocent as myself). However, my major concern is that If I don’t declare my property as a buy-to-let with my insurer, my policy becomes void i.e if my house burns down, I wouldn’t get a penny. If I declare my property as a buy-to-let and my house burns down, my insurer will talk to my lender and see the conflict in details- the insurer will see a buy-to-let property on the records and the lender will see a residential mortgage…OOPS!

So, is it worth it? Probably not.

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