A couple plan to travel for a year. How will that affect their mortgage? Photograph: Samuel Gibbs for the Guardian Money
Q I would be very grateful for any advice you can offer regarding having a mortgage but wanting to go travelling for a year.
My partner and I got a mortgage to buy our flat last year. We are currently both in full-time jobs but are thinking it would be nice to take a year out and go travelling. We (naively) thought that we could just rent out our flat (I know easier said than done) and set off on our travels. But now I have been reading that we may have to change our mortgage to a buy-to-let mortgage, which could significantly increase our interest rate and may result in charges due to changes in a three-year fixed-term contract.
So my question is, do we have to change our mortgage, or is there a way we can keep it the same, given that it is short term and we won’t actually be making a profit on the income of the rent (just helping to pay off the mortgage whilst we are away). KG
A You are right that you can’t just rent out your flat and set off on your travels but you may not need to worry about converting your mortgage to a buy-to-let loan. If you don’t plan to let your flat for more than 12 months and you intend to return to living in it, most lenders will consider what’s called a ”consent to let” arrangement for which there may be a administration fee of £100 to £300. As well as charging a fee to give you permission to let your property, some lenders will also increase the mortgage interest rate although they may not do this if you are on a fixed-rate deal.
Before giving its consent to let, a lender will need to be satisfied that your plan to let your flat has come about through a genuine change in your personal circumstances – for example, you have to move for work reasons and possibly, you’ve decided to go off travelling. You are unlikely to get consent to let if it looks as though you were always planning to let your property but applied for a residential mortgage to get a better deal.
But before approaching your lender to see if it will give you permission to let your property or if it will insist you swap to a buy-to-let mortgage (which it may), you need to find out if letting your flat is a realistic proposition. You need to know first whether the flat is in a fit state to be let and if it is how much rent you could get for it. If it isn’t in a fit state to let, you need to know what you should do to make it suitable, which could include fitting smoke alarms and extractor fans and making sure that any upholstered furniture is fire proof. You’ll also need to have gas appliances tested by a Gas Safe engineer and provide your tenants with an energy performance certificate.
If you plan to use a lettings agent to manage the letting of your flat – and deal with tenants while you are away – you should factor in their charge for this service which is generally 10% to 15% of the rental income. On top of that, you’ll need to pay for landlord insurance to protect the property while it has tenants in it, which your current buildings and contents insurance won’t. You should also factor in the cost of storing items that you don’t want left in the flat while you are out of the country. With any luck, the net rental income after deducting all the extra costs of being an absentee landlord will cover the mortgage. If it doesn’t, your travel plans will have to wait.