Letting your home without permission

Letting your home without permission

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Sezer Yilmaz
Financial Specialists
Mortgage advice for internationals 

 

 


Can I let my house without permission if I have a residential mortgage?

Rules and regulations from your bank or mortgage lender apply if you plan to rent a property with a mortgage. Good to know: owner-occupied homes use residential mortgages. In other words, you need to live in the house that you own.  If you plan to rent out your residential home and keep your current residential mortgage, you need the mortgage lender’s permission.

You can ask for permission if you: 

  1. Your current employer relocates you abroad for a fixed term, no longer than two years.
  2. The tenant(s) need to cover the mortgage payments with the rent. 
  3. You plan to move to a new property, but you cannot sell your house due to a lack of potential buyers. You could request permission under the vacancy law. To prevent your home from being empty for a longer time, you rent it out.

It could be hard to convince the bank that it’s challenging to sell your home in the current market, though. 

Your mortgage lender or bank can give you written permission to rent your home for up to 24 months. Your mortgage’s terms and conditions apply as soon as the duration of the lender’s approval ends. Please note, a mortgage broker can proceed with the consent quicker. 

The reasons why your mortgage lender could decline your permission for rent:

  1. The lender aims to protect you and your finances and, therefore, themselves by not allowing tenants in the property.
  2. Tenants are well protected in the Netherlands. Landlords need to follow strict regulations if they want to terminate a contract before the term ends. 
  3. If a bank wants to foreclose on the property, the bank sells your home. The new buyer is buying the property with an existing tenant. The new buyer can not evict the tenant, so the tenancy agreement significantly impacts the investment return and, therefore, the property’s value. It is difficult to find a suitable tenant who can take care of the property the same way the landlord does. 

If you decide to rent your property without written permission, you breach your mortgage terms and conditions. Please note, mortgage lenders have access to big data; for this reason, they can quickly figure out your position as an accidental landlord.  

Consequences of renting your property without permission:

  1. Penalties.
  2. Repayment of the entire loan. 
  3. The mortgage lender could reject you as a client.  
  4. Re-mortgaging is impossible living and working from abroad.
  5. Foreclosure.

What should I do if I want to let my apartment for the long term? 

 Suppose you aim to let your home for the long term, convert your mortgage to buy to let mortgage. Consider why you want to become a real estate investor. What is your rationale? Is that the best asset class to invest in for you? Useful to know: buy to let mortgages have higher risks than residential mortgages.

Contact us to explore your re-mortgaging options. We assess your financial situation and present possible scenarios. 

What fees do you need to be aware of when letting your property:

1. Maintenance fees.
2. Management fees.
3. Legal fees.
4. Capital tax.

Can I rent a room if I have a residential mortgage? 

It is possible to rent a room; however, we recommend first talking with a mortgage adviser. If you fail to inform your mortgage lender, you might be in breach of terms and conditions. Note: tenants have many right in the Netherlands; for this reason, you need to make sure you and your property are well protected. 

A case study

On the 23rd of April 2019, the Financial Services Disputes Committee (Kifid) handled a case concerning a consumer who was letting his property without the written permission from his Bank (logo with Orange Lion).

The person in question relocated to Belgium for two years.
 Below is a summary of what happened and Kifid’s decision on the matter.

11-07-2017
Before his relocation, the expat asked for permission from the Bank by writing an email:

“I want to ask permission to let my apartment [address]. I want to do this through a broker specialized in expat rental. I read that this was possible as the owner of my apartment if I am seconded abroad. (…) If you give your approval, I could start the process of transferring to […]”.

13-07-2017 and 26-07-2017
The Bank asks for more information and documents before they could assess the situation. The Consumer never sends that information and assumed that his initial email is sufficient.

Nothing else happened in 2017 anymore. The story continues in 2018(!).

One year later

13-08-2018
The Consumer replies with an email to inform them about his new job. He also asks for permission again to rent out his property.

16-08-2018 and 07-09-2018
The Bank asks for information regarding his relocation.

04-10-2018
The Consumer informs the Bank that he cannot provide the information asked.

10-10-2018 and 23-10-2018
The Bank sends a letter to confirm they don’t approve the Consumer’s request.

08-11-2018
Research shows that the Consumer has a tenant in the apartment. Furthermore, sending a letter to confirm once more there’s no approval to do so. Above all, the letter confirms the Banks’ rights. The Bank confirms that they’ve registered the Consumer at bank and mortgage specific registers(!). As a result, the entries notify other Banks when doing their due diligence. Furthermore, the refinancing will be more difficult.

The Bank gives the Consumer some time and two options:

Selling the apartment OR refinancing the mortgage before 01-06-2019.

13-11-2018
The Consumer sends an email not agreeing with the offered solutions.

19-11-2018
After that, the Bank sends a letter offering a new solution: if the tenant moves out before 01-01-2019, the Bank will drop the case.

17-12-2018
The Consumer files an official complaint in contrast to following the Banks’ rules.

28-12-2018
After receiving the claim, the Bank rejects it and asks for a copy of the termination of the rental contract so that their asset is safe.

18-01-2019
Finally, Hypocasso (mortgage debt collection agency) informs the Consumer that the Bank claims the mortgage debt.

25-01-2019
As a result, the Consumer repays the entire debt, including penalties and fees.

Decision

The Committee believes that the Bank did not act contrary to standards of reason and fairness when implementing its policy. Even more, the Bank has not violated the principles of proportionality and subsidiarity or its duty of care. Therefore, the Committee believes that the Bank was entitled to claim the mortgage debt from the Consumer on legitimate grounds. Source: Kifid

Always let a professional assess the situation before considering renting out your property.

Possibility: Refinance

If you’re dealing with a situation where your employer relocates you, then there are two options.

  1. First of all, there is the option to sell your property.
  2. The second option is to refinance your mortgage to an investment mortgage.

The goal of an investment mortgage is to let your property with written permission from your bank. Hence, there are no issues from your bank and no penalties to pay. Contact us if you have questions concerning letting your home.