Are you breaching your mortgage terms renting out your property on Airbnb?
Posted on 9 August 2018 by
In recent years the popularity of sites and apps such like Airbnb, which enables homeowners to offer their homes up to rent for paying guests for short periods of time, have risen sharply.
But an investigation by Guardian Money found that many people who might be considering hosting Airbnb guests could land themselves in a whole heap of trouble with their mortgage lender. So what do you need to be aware of?
Without consent, any Airbnb host with a mortgage is likely to find themselves in breach of their home loan contract. According to the The Council of Mortgage Lenders it’s likely that all owner-occupiers will find a clause in their paperwork preventing the letting of the property, on any basis, without prior consent.
So what are the risks?
The Guardian investigation found that found that in some cases homeowners might be hit with a fee or face a higher mortgage rate. But in others circumstances, the penalties could be far more severe. You could, potentially be risking a demand for the immediate repayment of the whole mortgage or even, in theory at least, being threatened with repossession.
Our senior mortgage technical manager Ray Boulger said that, "As a general rule, most lenders, if asked, would say no. A notable exception is Market Harborough building society, which openly states it will allow Airbnb hosting for up to 24 weeks a year if you seek consent. But this could increase your mortgage rate."
Carrying on without consent
If you ask your lender and they say ‘no’ you can’t plead ignorance later if they find out. It’s at that time you might want to consider speaking with a mortgage adviser and refinancing to a lender that does allow it.
If your bank or building society does discover you are hosting on Airbnb without its consent, the CML says it could seek immediate repayment of the total mortgage under the terms and conditions of the contract.
Clydesdale and Yorkshire banks, for example, say letting on Airbnb without consent "ultimately could result in the mortgage being recalled", adding that "this is likely to be a last resort".
Ray Boulger agrees that such a move would be extreme: "As long as mortgage payments are up to date, there is no way they would do that, and so a lesser penalty, along the lines of a rate increase or a fee, would be more likely."
Lenders may prefer to initially give you a warning. "I suspect that in practice, if a lender discovered an historic breach it would write reminding its customer of the terms of their mortgage and spell out the need to get permission if they want to use Airbnb or a similar site in the future," says Boulger. "If the borrower wanted to do that, charging an admin fee to regularise and authorise future lettings, rather than increasing the rate, is I think the most likely lender response."
To read the original article on the Guardian website please click here
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