Our Rent a Room Mortgages allow an individual applicant to borrow more by renting out a room and using the rent towards the mortgage payments.

What if your client has found their ideal home, but their income isn’t quite enough to get the mortgage they need? Well, if the property has a spare bedroom, our Rent a Room mortgage might be just the answer. If your client rents out a spare bedroom, we will take into account the rental when deciding whether we can offer them the mortgage they need.

This example explains how it works: An applicant earns £28,000pa and wants to buy a two-bedroom property for £200,000. The applicant has a 20% deposit, so needs a loan of £160,000. The broker has approached a few lenders, but they are unwilling to lend this amount based on the £28,000pa income. The applicant has a friend who is looking for somewhere to live and is interested in renting the second bedroom; they do not want to buy a property together as they do not want the long-term commitment. The friend is happy to pay £400 per month to rent the spare bedroom. The Broker speaks with one of our Business Development Managers who calculates that, with a Rent a Room mortgage, the rent would cover about £48,000 of the loan, leaving just £112,000 to be covered by the other income.

Some important notes.

  • The example is based on a single person with no children and no other debt and assumes a 25-year repayment mortgage.
  • The actual figures will depend on your client’s individual circumstances.
  • Single applicants only.
  • Maximum Loan to Value is 85%.
  • Rental income from only one tenant will be taken into account and the expected rental will be based on an independent assessment.
  • Minimum gross annual income of £20,000pa after deductions (excluding the rental income), employed or self-employed.
  • The amount being covered by the rent must be no more than 4 x the borrower’s income.
  • The property must be fit for purpose; for example, it must have at least two bedrooms and be suitable for occupancy immediately on completion of the mortgage.
  • There needs to be a formal agreement with the tenant.

For further information contact Kerrin White, Business Development Manager, on 01225 475 732 or 07469 353 396. Or email kerrinwhite@bibs.co.uk