Renting Out The Home You Used To Live In

Households that move sometimes retain the previous property and let it out. That decision is often made by default, and it changes the property's status entirely.

The lending terms were written for occupation

A residential mortgage is generally granted on the condition that the borrower occupies the property. Letting it without permission breaches that condition.

Lenders usually offer either consent to let for a limited period or a switch to a different product priced for rental use, which typically carries a higher rate.

Proceeding without addressing this is a contractual breach that can allow the lender to demand repayment, and it may also affect insurance validity.

Insurance is a different product

Standard home insurance is priced for owner occupation. A property let to tenants requires cover written for that use, including liability appropriate to a landlord.

Cover for an unoccupied property between tenancies is also usually restricted, with conditions about how long it can stand empty before cover changes.

These distinctions matter only at the point of a claim, which is when discovering them is least useful.

The decision is often emotional rather than financial

Retaining a former home is frequently driven by attachment, by a belief that prices will recover, or by reluctance to conclude a chapter.

Those are real considerations, but they produce a different decision from the one a household would make if presented with the same property as a new purchase.

The clarifying question is whether the household would buy this specific property, in this location, as an investment today. Often the answer is no.

Suitability as a rental is not the same as suitability as a home

Features that made the property a good home — a particular layout, a garden, proximity to a school the children have left — may add little to its rental value.

Maintenance obligations, safety requirements and the standards expected of let property are also higher than those a household applies to itself.

Bringing a former home up to letting standard can require work that was never necessary while it was occupied by the owner.

Distance changes the running cost

A property retained after a move is often some distance away, which makes self-management impractical and agency management effectively necessary.

Agency fees, both for finding tenants and for ongoing management, reduce the net return and are charged whether or not anything requires attention.

Tax treatment of rental income, of costs and of any eventual sale varies by jurisdiction and changes, including relief for periods of prior occupation.