In times when an economy is in recession, it may be more attractive for some people to move in together while leasing the vacant house in order to make the mortgage payments and hopefully bring in additional income. The vacant house can't simply be sold because in a recession, it is likely that more could be owed on the mortgage than it is worth because of depressed housing prices.
In order to get a consent-to-lease mortgage, you need to get permission from various people. Those people are your mortgage lender, the property owner's insurance company, the person who will be leasing the property and any other owners of the property. If the property is being sublet from one tenant to another, then you need to have the permission of both tenants.
The Financial Times reported that lenders used to not have a problem with consent-to-lease mortgages. They only wanted to see that the mortgage payments stayed up to date. However, as of 2011, mortgage lenders have been denying their consent for changing the terms of the mortgage or if allowing it, charging higher rates and fees in order to authorise the mortgage. You will also need to take out a landlord insurance policy on the property.
You will need to have a formalised agreement with the renter in order to get a consent-to-lease mortgage. The rental agreement needs to set forth the tenant's obligations during the lease term. It also states whether the owner of the property is liable if the tenant doesn't meet his obligations. It should include the names of the owner and any tenants involved in the agreement.
Renting Without Permission
If you rent out your property without getting permission from your mortgage lender, you may be in breach of contract. This could lead to the mortgage lender stopping the leasing of the property or even requesting that you pay off the mortgage. If you don't tell your insurance company, they could cancel your policy.