House Doctor: 'I'm renting out my former flat, but haven't told my lender'

Question: My fiancé and I have bought a new home together and have just rented out my old flat.

However, I haven't told my old lender and although friends and colleagues do the same and say it's fine, my fiancée is unhappy and says I'm breaking the law. Is this really true? I can't afford to pay a higher "buy-to-let" rate on my old flat as the new mortgage is enough as it is.

Yours, JW, Wells

Answer: You can relax: your mug shot won't appear on Crimewatch anytime soon. However, you have reneged on your original deal with your mortgage lender and – if you take no further action – could store up a lot of future trouble for yourself.

"Your mortgage will have been set up on a deal available on the basis of you being the owner-occupier, and the terms will preclude you from letting the property without the lender's formal consent," says David Hollingworth at the broker London & Country.

"So you will therefore be in breach of the mortgage terms and while there are bound to be plenty of people that have done this – knowingly or not – it doesn't alter the fact that you should seek consent." Securing the lender's consent would simply give you peace of mind that, if anything were to go wrong, your lender won't take a dim view of your situation and create a financial mountain out of a molehill.

Imagine your tenant proves to be a woefully poor payer and leaves you out of pocket on more than one occasion, forcing you to miss a monthly mortgage payment or two. A lender kept in the dark is less likely to be tolerant than one who is fully informed about the tenant.

In a scenario where you were to repeatedly struggle to meet those mortgage payments, it could make a huge difference to your finances with an understanding lender prepared to cut you some slack rather than one insistent on full payment because you broke its terms and conditions.

Owning up may not even carry a penalty. "Your lender may not charge you a buy-to-let rate as they all have different policies on this," says Melanie Bien at broker Private Finance. "Some will charge no extra, some will charge a slightly higher rate and others will make you switch to a buy-to-let that can be considerably more expensive – if it's one of the first two, you may be worrying unnecessarily."