Accidental Landlords

by Mark Johnston

There can be no dispute that it is becoming increasingly difficult for home owners to sell their homes in today’s uncertain market.

According to property valuation agency, Hometrack’s latest index, properties are now taking on average more than 15 weeks to sell, last year the average time on the market was just 9 weeks. Sellers are also only achieving around 93% of their original asking price.

Therefore with the market seemingly stalled in many areas, it is not surprising that many people who need to move are now considering renting out their homes rather than slashing their asking price.

The stagnant housing market has meant that frustrated vendors have been essentially forced in to renting out their homes, while trying to buy elsewhere.

The Co-Operative bank has suggested that at least a fifth of its recent buy to let business has come from accidental landlords.

The latest research from the National Association of Residential Letting Agents (ARLA) also indicates that the numbers of homes that are now coming on to the rental market is due to the fact home owners are having difficulty selling them.

David Salusbury, chairman of the National Landlords Association (NLA), said “a significant minority of people who let out property did not set out to be landlords”.

A recent report from the National Landlords Association (NLA) showed that despite the increase in the number of buy to let mortgages available, only 57% of landlords deliberately entered the market with buy to let in mind.

There are of course drawbacks to renting out a property instead of selling and therefore it will not be the best strategy for everyone.

Tim Hyatt, president of the Association of Residential Lettings Agents (ARLA), said “lettings is an unregulated industry and there can be pitfalls for both tenants and landlords, including loss of monies. Therefore it is vital that every landlord, reluctant or keen, seeks expert advice”.

David Hollingworth, director at mortgage broker London and Country, warns “you must tell your mortgage lender before renting out your home”.

Accidental landlords are being stung with more expensive ‘let to buy’ mortgages as lenders take advantage of desperate sellers unable to move.

All banks have different policies; some lenders will allow their borrowers to stay on their current residential mortgage deal for as long as it lasts. This means their repayments will be much cheaper than if they were a professional landlord.

Before the credit crunch, banks were more relaxed about so called ‘consent to let’, but these days borrowers can be refused outright or charged a higher mortgage rate.

In these cases borrowers may be then forced to re-mortgage to an expensive buy to let deal. To avoid this risk, borrowers may be tempted not to inform their lender that they are renting out their property.

Unfortunately, according to the Council of Mortgage Lenders (CML), borrowers are legally obliged to inform their lender and ask for ‘consent to let’. If they do not inform them, they would be in breach of the conditions of their mortgage contracts.

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