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Letting your home

If you rent out the whole of your home to someone else, this is called letting. The person who pays you rent is a tenant.

Can I let my home?

Most mortgage agreements do not allow you to rent out your home without your lender's permission. Check your mortgage agreement to see what it says.

If your agreement says you need permission, it's important to get this before anyone moves in. If you don't, you could be breaking your agreement and your lender may be able to take you to court. Letting is not always allowed, and many lenders refuse to give permission if you have mortgage arrears. Some lenders charge a higher rate of interest if you rent out your home, so your monthly payments could increase. Get advice if you have problems negotiating with your lender.

Whatever you decide to do, you will be responsible for keeping up with future mortgage payments and paying off any arrears you have, regardless of whether your tenant pays their rent.

Bear in mind that if you are married or in a civil partnership or if you own your home jointly with someone else, you'll also need to get permission from your partner or the other joint owner(s).

Why let my home?

You may wish to let your home because you need to go away for a period of time due to:

  • work commitments
  • family commitments (for example, to care for someone)
  • long term travel plans.

Or you may wish to earn extra income by letting out your home and staying somewhere cheaper. Renting out your home is normally only a good option financially if it will mean you can afford to pay your mortgage and also pay rent somewhere else. In many areas, rents will be higher than your mortgage payments, so you need to work out whether it will actually make paying your mortgage easier.

What tenancy status would a tenant have?

If you rent out your property out from 1 December 2017, then your tenants will have a private residential tenancy. If you rented your property out before 1 December 2017, then they will be either assured or short assured tenants.

Should I use a letting agency?

Using a letting agency as a 'middle man' can be a hassle-free way of renting out your home. Although, as the landlord, you will still have the same legal responsibilities, letting agencies can ensure these responsibilities are carried out efficiently. The agency will charge fees for their services, which will be deducted from the rent you receive.

Agencies can:

  • find suitable tenants for you
  • collect rent and deal with any rent arrears
  • carry out repairs on the property
  • deal with any other problems your tenants may have.

Shop around before you commit yourself to one particular agency. Make sure any agency you choose is a member of the Association of Residential Letting Agents (ARLA) or accredited by the National Approved Lettings Scheme (NALS). If you can, speak to other landlords and tenants who have used letting agencies and see if they are satisfied with the service they have received.

You can find letting agencies listed in the Yellow Pages and on the NALS website. Renting Scotland has a Guide to choosing a letting agent if you're a landlord.

Will I need a licence?

If you are letting your home, you must register with your local council, unless you are specifically exempt. It is a criminal offence not to do so. You can find out more about landlord registration here.

In addition, if you rent your home out to three or more tenants who are not part of the same family, you will need to get a licence from the council to operate a House in Multiple Occupation, or HMO. It's a criminal offence to let your home out as an HMO without a licence, and you could face a £50,000 fine. Go to the page on HMOs to find out more about your responsibilities and read the Scottish Government's guide for HMO landlords to find out how to apply for a licence.

How will letting my home affect my benefits?

If you are on means tested benefits such as income support or income based jobseeker's allowance, these will probably be reduced if you rent out your home. This is because the rent you receive will be counted as income, and the value of your home (minus your outstanding mortgage and any debts you have) will be counted as capital. However, if you live in an area where rents are high and are able to move to a cheaper area or a smaller property, renting out your home may give you more income than you would get on benefits.

Although your benefits may be reduced, it is important to inform certain organisations as soon as you start receiving rent. If you don't, you will probably have to pay back any benefits that you weren't entitled to. You may need to inform:

  • JobCentre Plus
  • a disability centre
  • the Pensions Service and/or
  • your local council.

Will my buildings insurance be affected?

Renting out your home may also affect your buildings insurance. To make sure your home continues to be protected against damage by a valid insurance policy, you must inform your insurers of the new situation. This may mean they will increase your premiums

Will I have to pay tax?

You normally have to pay income tax on the rent your tenants pay. You can find out more at the Direct.gov website.

If you later decide to sell your home (without moving back in first) you may also have to pay capital gains tax. This will only be the case if the value of your home has increased since you bought it.

Scotland map Housing laws differ between Scotland and England.
This content applies to Scotland only.
Get advice if you're England

The important points

  • Most mortgage agreements do not allow you to rent out your home without your lender's permission.
  • Your tenant will probably be an assured or short assured tenant.
  • Using a letting agency as a 'middle man' can be a hassle-free way of renting out your home.
  • If you are letting your home, you must register as a landlord with your local council.

If you're still looking for help, try searching, or find out how to contact us

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