Must I tell my mortgage lender I'm letting my flat?

Q I bought my first house three years ago and have lived in it since then. However, I now want to move into my girlfriend's house and rent my house out. Should I tell my mortgage company that I am no longer living at the property and that it is being rented out?

I have spoken to a couple of people at my bank and been given different answers on this, everything from: "You need to tell us because we will have to put you on a buy-to-let" to: "It doesn't matter, everybody does it and we won't know as long as the mortgage is being paid".

I believe it is a term of my mortgage that I do tell them if I move out and rent the property, but do I really need to and what would happen if I didn't and five years down the line they found out?

MF

A The short answer is that if you believe that it is a term of your mortgage contract that you must tell your lender if you move out and let the property (which is very likely to be the case), yes you should comply with the terms of the legal contract that you signed.

Although the sky may not fall on your head if you "forget" to tell your lender as the more irresponsible of the two members of bank staff you spoke to suggested, you would be storing up trouble for the future.

Lenders tend to apply higher interest rates to buy-to-let mortgages than they do to residential mortgages. So if your lender discovers that you have not been paying the higher rate when you should have been, you could be faced with a - perfectly legitimate - lump sum bill for the shortfall when your lender discovers what you have been up to.

However, you won't necessarily pay a higher rate for moving to a buy-to-let mortgage with your particular bank and you may be able to argue that you can keep the same deal as you currently have - especially if you can show that you could get a better buy-to-let deal from a rival lender.

But whatever you decide to tell your lender, it is absolutely essential that you tell your house insurer since failure to do so may mean that you are unable to claim in the event of damage to the property.