Rent a room mortgages

Has your client found their ideal home but their income isn’t quite enough to get the mortgage they need? A spare room can help! Our exclusive Rent A Room mortgage lets applicants use rental income from letting out a spare room to get the mortgage they want, and can help towards monthly payments. This is especially useful for first time buyers who may need that income boost to get on the property ladder.

Use our affordability calculator to get an idea of how much your client could borrow. This unique calculator allows you to add expected lodger income to the calculation (in the Applicant details section) and will work out the maximum amount they could borrow, assuming the rental income received would cover at least 50% of the mortgage.

Affordability calculator

Find out how much your client can borrow with our affordability calculators.

Find out more

Variable mortgages

Our Standard Variable Rate (SVR) is currently 8.39% (variable).

There may be a limit on how low your interest rate can fall. This is called an ‘interest rate floor’. The interest rate floor applicable to your loan will be specified in your loan documentation.

Product name

85% Rent A Room variable for 2 years

Product code: RDD169

Initial rate

6.24%

Discount from SVR

2.15%

Overall cost for comparison

8.2% APRC

Max LTV %

85%

Product fee

£999

Fixed rate mortgages

The mortgages listed below move on to our Standard Variable Rate (SVR), 8.39% (variable) after the initial rate period.

Product name

85% Rent A Room fixed for 2 years

Product code: RDF160

Initial rate

6.09%

Overall cost for comparison

8.2% APRC

Max LTV %

85%

Product fee

£999

Product name

85% Rent A Room fixed for 5 years

Product code: RDF154

Initial rate

5.59%

Overall cost for comparison

7.7% APRC

Max LTV %

85%

Product fee

£999

Repayment type
Interest only and repayment options available
Key features
- Availability – Purchase up to 85% Loan To Value (LTV). Minimum deposit of 15% required.
- Flexibility – Overpayments up to 20% of the capital balance as at 1st January are allowed in each calendar year without penalty.
- Portable.
Early repayment
If you repay your mortgage early, or make an overpayment, you may have to pay an early repayment charge.
For full repayment of a 5 year fixed product, you will pay 3% of the outstanding balance in years 1, 2, 3 & 4; 2% in year 5, plus a Closing Administration Fee (currently £100).
For overpayments of a 5 year fixed product, you will pay 3% on any amount exceeding your 20% limit in year 1, 2, 3 & 4, 2% in year 5.
For full repayment of a 2 year fixed or discounted product, you will pay 3% of the outstanding balance in the first year and 2% in the second year, plus a Closing Administration Fee (currently £100).
For overpayments of a 2 year fixed or discounted product, you will pay 3% on any amount exceeding your 20% limit in the first year and 2% in the second year.
Product fees
- Valuation fee.
- Product fee £999.

Lending criteria

Rent A Room Lending Criteria and Information

Loan:	Size: Minimum £50,000, Maximum £500,000. Term: Minimum 5 years, Maximum 40 years.
Property:	Minimum Value: £100,000. Must be in England, Wales or Scotland. The property must be fit for purpose and suitable for immediate occupancy.
Location:	Must be in England, Wales or Scotland. We are unable to offer a Right To Buy mortgage in Scotland.
Applicant:	Age: Minimum 18, maximum is 85, subject to income in retirement.
Income:	Minimum income of at least £20,000 p.a. after deductions (excluding rental income), employed or self employed. No minimum period of employment, but must have passed probation, or have 3 years self-employment history.

The amount we will lend will depend on the value of the property and a calculation based on earned income, rental income and expenditure. As a guide, we will take gross annual income (not including rental income) and then apply a deduction for the annual amount paid towards any existing debts or other financial commitments. We apply a multiplier of up to 4x and apply a rental coverage assessment from letting a room in the property to cover up to an additional 4x income. Only one tenant can be assessed and the expected rental income will be based on an independent assessment.

These multiples are for guidance only and do not guarantee that we will lend the amount indicated. We will carry out a full assessment of your income and expenditure to ensure that you can afford your mortgage both now and in the future.

Underwriting:	We take a flexible approach to underwriting and will consider each case on its merits. We do not credit score. The actual rate and APRC for your case will depend on your circumstances and our assessment of the risk. There needs to be a formal agreement with the tenant letting the room in the property.

We recommend that borrowers take tax advice.