John Charcol has brought out a new mortgage enabling those who are purchasing a home with a spare room to borrow more.
The "rent a room" mortgage utilises the government’s lodger scheme, allowing people earning up to £4,250 a year in rent tax-free to adds that to a borrower’s income.
This enables people taking out a larger mortgage than would otherwise be the case. The John Charcol calculation highlights that you could borrow £18,000 extra using the rent a room mortgage than you could otherwise.
This product enables people to benefit from lodgers. Lots of people have a lodger as it helps pay mortgages as well as bills. Therefore offering a formal solution helps go that one stage further.
Therefore, some are able to join the property ladder, with others being able to afford two bedrooms whereas they may have only been able to afford one before.
Rent a room mortgages have certain features:
5.99% Interest rate fixed till 30/06/09, reverting to 0.99% above Base rate for term or Bank rate 0.5% for two years reverting to 0.99% above Base rate.
£4,250 may be added to gross income for first room, with £3,188 (75%) being added for a second room. The maximum amount is £7,438 which can be added to your salary
A minimum salary of £25,000 is required.
4.25 single income and 3.25 joint income is available.
Max loan at 95% LTV is £250,000; at 90% LTV £350,00; and at 85% LTV £500,000.
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Room to Rent Mortgage Introduced to Market Wed, 18 Apr 2007
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