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Drummer

Consent To Let

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Seems like this loophole makes BTL financing a laughing stock.

If you cannot raise the deposit needed for a BTL mortgage, buy somewhere on an Owner Occupier mortgage (call it a 2nd home, whatever) then simply request for Consent to Let from your mortgage provider who, more often than not, will allow you to rent the place out.

Why do it this way?

  • The interest rates are lower on an OO mortgage
  • By not switching the mortgage mid term you are avoiding paying the exit penalties
  • Deposits required are much lower than BTL mortgages
  • You can still offset the interest as an expense, as per normal BTL mortgages

Am I missing something?

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You'll need enough income to cover your existing mortgage + the new mortgage with no rental income in the equation. Most people simply are not going to have that sort of excess income.

Consent doesn't have to be granted, the mortgage provider could simply say no or call in the loan. I'm sure it will be buried in the T&Cs.

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The lender may also increase the rate as a condition of the permission (if it is granted)... I think Nationwide for example adds 1% to the mortgage rate if get permission to let your property out.

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Am I missing something?

Aside from the matters already mentioned by North West Midlander and xela57 there's also the matter of interest-only vs repayment. Excepting some fairly niche mortgage products you'd find it very difficult indeed to get an interest-only mortgage as an owner-occupier. The consent to let wouldn't turn a repayment mortgage into an interest-only mortgage, and where so-called 'gross yields' are low buy-to-let simply doesn't work on a repayment mortgage.

The role of consent-to-let is probably non-trivial, but IMO it probably lies not in the mechanism you propose but in enabling people to avoid selling when no buyer willing to pay their fantasy price can be found - just rent it out, innit.

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A standard condition for consent to let us that the new property must be worth more than the old. This is to ensure that the buyer is not using this as a dodge to buy a BTL at an OO rate.

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