Mortgage lenders in the UK are increasingly taking action against people who rent out their homes but fail to inform their bank.
Lenders are suspicious that there may be thousands of so-called “accidental landlords” who do not tell them about their rental arrangements out of fear of incurring a higher interest rate or being forced into a more expensive buy-to-let loan.
Some analysts believe as much as 30% of landlords become so accidentally, perhaps due to negative equity or short-term employment in another area.
Now it appears that lenders are increasingly investigating who is living in the property. They are using the electoral register, social media websites and letting websites such as Rightmove.co.uk.
Borrowers are obliged to inform their lender if they intend to rent out their property. As lenders consider buy-to-let a riskier proposition, mortgages can be 1% or 2% higher. An administration fee for a mortgage change is also applied.
Those in negative equity have no option but to accept whatever terms their lender demands.
Failure to notify the lender breaches the terms and conditions of the contract, but also runs the risk of invalidating home insurance policies.
Lenders differ in the terms they impose, but new interest rates for borrowers are in the region of 1% to 2% more. The administration fees also vary, from £30 (Nationwide) to £295 (Santander).
