Mortgages Knowledge Hub

How do I rent out my house?

If you have a residential mortgage on your property and are thinking of renting it out, there are lots of factors to consider. How can you get your property ready to rent and what do you need to do before advertising for tenants?

If you’re an owner-occupier thinking of moving out of your house, whether you’re moving in with a partner, going travelling, or relocating for work, you could be debating whether to sell up or rent it out.

You might want to let your property, hoping that it would turn out to be a good investment, or you could decide to temporarily rent it out if you’re struggling to sell it.

Whatever your reason for letting your property, there are lots of things you need to consider.

Read on to find out how to rent out your house and what you need to do before you can welcome your first tenants through the door.

This guide focuses on what to do if you’re thinking of letting a property you have previously lived in; if you are thinking of buying a property for the sole purpose of letting it, see our guide on buy-to-let mortgages for more information.

Should I rent out my house?

There are many reasons why you may want to rent out your house, but before making a decision you will need to understand the financial and legal implications of becoming a landlord to work out if letting your house is a viable option for you.

Some owner-occupiers will choose to rent out their property to get an additional source of income, also hoping that the house will increase in value over time so they can sell for a higher price.

However, it isn’t just as simple as collecting a regular income and making a profit. You need to bear in mind that being a landlord comes with numerous costs and responsibilities, and that there is also a risk that your property could fall in value over time.

Not everyone will necessarily want to become a landlord; some homeowners will let their house simply because it is the best solution for their needs.

For example, if your house is taking a long time to sell or you are temporarily moving away for work, you could become one of the many “accidental landlords” in the property market. As you would still need to keep up with your existing mortgage payments after you move out or while you wait to sell, you could end up paying for two properties. In these instances, temporarily letting out your house to cover its costs could be a possible solution.

Before you start the process of letting your property, you need to ensure you could comfortably afford all your landlord expenses as well as your own living costs. If you plan to buy a new home for yourself with a mortgage, you will need to save up for a deposit and make sure you would be able to manage these repayments in addition to your rental property expenses.

Letting agents could help you to see if renting your house is a feasible option, by giving you an idea of the levels of demand in your area and how much rent you could charge for your property.

This guidance would indicate whether letting your property could realistically cover all your estimated landlord expenses including:

  • Mortgage payments (and any other lender fees)
  • Letting agent fees
  • Ongoing maintenance and emergency repairs
  • Landlord insurance
  • Upfront costs to get your property in a fit state for tenants e.g. decorating, cleaning, safety checks

You will also need to consider the tax implications. Your rental income will be added to your other income to determine what rate of tax you pay- so it could push you into a higher tax band. Remember that if you sell the property after letting it you may also need to pay Capital Gains Tax.

Do I need to tell my mortgage provider that I’m renting out my house?

Yes, if you decide to let your property, you will need to inform your mortgage provider. You won’t be able to let your property under the terms of a residential mortgage, so letting it without receiving prior permission from your lender could breach this contract.

If you’re only looking to rent out your house on a temporary basis, some lenders may grant you a consent to let. This is an agreement that will allow you to temporarily let your property, but getting this consent will depend on your reasons for wanting it and your financial situation.

The lender might charge you for this, either as a fee or as additional interest, and the consent will only be valid for a specified length of time. At the end of the agreement, you may be able to get an extension if needed, or you could switch to a buy-to-let mortgage if you want to continue renting out your house.

A consent to let is not intended to be a long-term means to let your property, but rather a short-term solution to at least cover costs if you are faced with the prospect of paying a mortgage on an empty house.

It means you don’t need to go through the hassle of permanently switching to a buy-to-let mortgage, but you would still need to deal with all the other costs and legalities associated with letting a property.

Some lenders may refuse to grant a consent to let as you need to meet certain criteria to be eligible, such as holding the mortgage for a minimum amount of time or owning a certain amount of equity in the property.

If you can’t get this consent, or if you are looking to let your property for an extended period of time, you would need to switch to a buy-to-let mortgage, either with your existing lender or a new lender, and pay any fees you may incur.

The process of getting a buy-to-let mortgage to rent out your current house, while simultaneously buying a new home with a residential mortgage, is sometimes referred to as “let-to-buy”.

How do I set up a buy-to-let mortgage?

Whether you’re getting a buy-to-let mortgage for a new property purchase or you’re switching from a residential mortgage, you still need to meet the lender’s requirements and go through the usual application process.

Criteria for buy-to-let mortgages will typically be stricter than for residential mortgages, with eligibility based on your credit rating, income, and how much rent you will charge, among other factors.

Because of the added risk involved with buy-to-let, lenders may be more reluctant to approve applications. As a result, you will often need to put down a bigger deposit (25-40% of the property’s value), and you may also be subject to higher fees and interest rates than on a residential mortgage.

The majority of buy-to-let mortgages are interest-only, which means you only pay the interest of the loan each month, and then pay the rest of the capital at the end of the term. Landlords will often sell the property to pay this.

Both you and your mortgage provider need to be confident that you can realistically afford a buy-to-let mortgage, and that you will still be able to cover costs if your property is empty for a period.

How do I rent out my house?

If you are currently on a standard residential mortgage, then before letting out your house you will need to inform your mortgage provider and ensure you are allowed to let your property.

Of course, if you own the house outright and it does not have any mortgage on it, then you are free to let it as you see fit.

But, regardless of whether you own outright, have a consent-to-let, or have a buy-to-let mortgage, you will need to ensure your property is in a suitable condition to let to tenants. To make sure it meets the required standards, you will need to:

  • Get a gas safety certificate from a registered engineer
  • Get an Energy Performance Certificate
  • Ensure any electrical installations/appliances in the property meet safety standards
  • Make sure the building and any furnishings meet fire safety regulations
  • Install smoke alarms

The government website has more information on your responsibilities as a landlord.

Many landlords will enlist a letting agent to handle everything, in exchange for a percentage of the rental income. Letting agents can save landlords a lot of time as they can:

  • Advertise the property
  • Deal directly with tenants, including any problems or emergencies
  • Arrange the paperwork, such as credit and reference checks and the tenancy agreement
  • Protect your tenants’ deposits in a tenancy deposit scheme
  • Organise services and checks of the property e.g. annual boiler service

Landlords could choose to manage all this themselves. However, if you don’t use a letting agent, you should join a landlord association or accreditation scheme to show you uphold professional standards and to help you keep up-to-date on any changes to letting rules and regulations.

When you rent out your house you will also need to contact your home insurer as your existing home insurance policy won’t cover the additional risks associated with letting a property. Landlord insurance can provide cover for buildings and contents, as well as specific cover like loss of rent, home emergency, and property owners’ liability.

Should I rent a room in my house?

To earn some extra income without letting a full property, you could rent a room in your own home.

You could earn up to £7,500 a year tax-free by taking in a lodger and opting into the Rent a Room Scheme, which is open to both owner-occupiers and tenants (providing their contract allows this) who want to let out furnished accommodation.

Before taking in a lodger, you need to check that you are allowed to rent a room under the terms of your mortgage and insurance agreements, and make any amends as necessary.

As with renting out a full property, as the landlord you would be responsible for the maintenance of the property and ensuring it is safe and in a suitable condition for the lodger, as well as paying council tax and any utility bills.

What are the pros and cons of renting out my house?

There are several benefits to renting out your house including:

  • Allows you to travel or live elsewhere without needing to pay for an empty house
  • Rent gives you a regular, additional income
  • Your house could potentially grow in value while you let it
  • A tangible, long-term investment
  • It’s a possible alternative if you’re not able to sell your home

However, these benefits come with certain risks. Some of the possible cons of renting out your house include:

  • Lots of costs involved to get a property ready for tenants and to rent it out
  • You will be responsible for all repairs and maintenance
  • Letting a property and being responsible for its safety and upkeep is a big commitment
  • Can be time consuming and lots of rules and regulations to stay abreast of (although letting agents would help with this)
  • Risk that tenants could damage your property and/or miss rental payments
  • Risk that your property will sometimes be unoccupied, so you will need to be able to cover any loss of rental income
  • Possibility that property prices will fall. This could be a particular issue if you have an interest-only buy-to-let mortgage as the sale of the house may not cover the remaining capital left to pay, so you would need to have a plan to make up any shortfall.

How much rent should I charge?

As a general rule, the rent you charge should be at least 25% higher than your monthly mortgage payments.

For extra guidance, you can look at the rent that similar properties in your area are asking for, but you should work out yourself what rental income you need to cover your costs.

The rent will need to be more than enough to comfortably cover all your regular expenses, give you an income, and have some surplus left over to cover any unforeseen costs, such as emergency repairs, missed rent payments, and periods without tenants.

When setting your rent, you may also want to make sure it can cover any future increases in mortgage interest rates, insurance, or other costs.

Use our mortgage calculator to help you calculate how much rent you should charge.

What else do I need to consider?

Some other questions and points you will need to consider when you decide to rent your house include:

  • Be prepared to pay a significant amount of upfront costs before you even begin to get any rental income.
  • Will you let your property furnished or unfurnished?
  • Will you include utility bills in the rent?
  • Before a tenant moves in, draw up an inventory which both parties agree with. You can use this at the end of the tenancy to resolve any disagreements over any damages etc.
  • Remember that if you’re buying a second property, the stamp duty costs will be 3% higher than standard rates.

Written by Rhiannon Philps

    Published on 04-09-2020

    Updated on 11-09-2020

I am a financial writer for KnowYourMoney.co.uk. I spend the majority of my time writing and researching financials guides and articles for consumers.

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