Rent a Room Mortgage


What if your client finds 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 they rent out a spare bedroom, we will take into account the rental when deciding whether we can offer your client the mortgage they need.

Our Rent a Room Mortgage is a unique in the fact it allows an individual applicant to increase their borrowing by renting out a room. This is because we will take into account the increased income that the room rental provides and factor this in to increase the overall borrowing.

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 but is struggling to find a lender to go to that loan amount because they only earn £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. Either yourself or a broker will now contact Bath Building Society who will calculate that rent would cover about £48,000 of the loan and the remaining £112,000 will be covered by the income.

Product Name

The overall cost for
comparison is:

Rate structure based on our Standard
Variable Rate

Availability

Flexibility

Fees

Early Repayment Charges

3 year Residential 2.45% Discount
RDD051

5.1% APRC

2.99% variable for 3 years followed by Standard Variable
Rate (SVR), currently 5.44%

Purchase up to 80% Loan To Value (LTV).

Minimum deposit of 20% required.
 

Overpayments up to 20% of the capital balance as at 1st January are allowed in each calendar year without penalty.

Portable.

  • Product Fee 0.4% of  advance (Minimum £599)

  • Administration Fee £125

  • Valuation Fee (scale)

  • Completion Fee £75.

3 % in years 1 & 2, 2% in year 3, plus a Closing Administration Fee (currently £100).

3 year Residential
2.25% Discount

RDD061
5.2% APRC 3.19% variable for 3 years followed by Standard Variable
Rate (SVR), currently 5.44%

Purchase up to 85% Loan To Value (LTV).

Minimum deposit of 15% required.

Overpayments up to 20% of the capital balance as at 1st January are allowed in each calendar year without penalty.

Portable.

  • Product Fee 0.4% of  advance (Minimum £599)

  • Administration Fee £125

  • Valuation Fee (scale)

  • Completion Fee £75.

3 % in years 1 & 2, 2% in year 3, plus a Closing Administration Fee (currently £100).

An example: A mortgage of £177,000 taken out for a period of 36 years on a repayment basis.

Monthly instalments: £670.38 per month for 35 months, followed by £920.06 per month for 396 months

Total amount payable, including fees: £389,250.06.

Total amount of credit: £177,000.

The total amount payable includes product fee £708, valuation fee £285, administration fee £125, closing fee £100 and completion fee £75.

The example relates to Product Code RDD051, is based on a typical mortgage and assumes that fees are not added to the mortgage. Please ask for a personalised illustration for your own particular requirements.

Product Name

The overall cost for
comparison is:

Rate structure based on our Standard
Variable Rate

Availability

Flexibility

Fees

Early Repayment Charges

5 year Residential 3.29% Fixed
RDF008

4.9% APRC

3.5% fixed for 5 years followed by Standard Variable
Rate (SVR), currently 5.44%

Purchase up to 80% Loan To Value (LTV).

Minimum deposit of 20% required.
 

Overpayments up to 20% of the capital balance as at 1st January are allowed in each calendar year without penalty.

Portable.

  • Product Fee 0.4% of  advance (Minimum £599)

  • Administration Fee £125

  • Valuation Fee (scale)

  • Completion Fee £75.

3 % in years 1, 2, 3 & 4, 2% in year 5, plus a Closing Administration Fee (currently £100).

5 year Residential
3.5% Fixed

RDF009
5.0% APRC 3.5% fixed for 5 years followed by Standard Variable
Rate (SVR), currently 5.44%

Purchase up to 85% Loan To Value (LTV).

Minimum deposit of 15% required.

Overpayments up to 20% of the capital balance as at 1st January are allowed in each calendar year without penalty.

Portable.

  • Product Fee 0.4% of  advance (Minimum £599)

  • Administration Fee £125

  • Valuation Fee (scale)

  • Completion Fee £75.

3 % in years 1, 2, 3 & 4, 2% in year 5, plus a Closing Administration Fee (currently £100).

 

An example: A mortgage of £177,000 taken out for a period of 36 years on a repayment basis.

Monthly instalments: £700.52 per month for 59 months, followed by £912.17 per month for 372 months

Total amount payable, including fees: £382,100.92.

Total amount of credit: £177,000.

The total amount payable includes product fee £708, valuation fee £285, administration fee £125, closing fee £100 and completion fee £75.

The example relates to Product Code RDF008, is based on a typical mortgage and assumes that fees are not added to the mortgage. Please ask for a personalised illustration for your own particular requirements.

 

Some important notes

•Single applicants only with no dependant children

•Rental income from only one tenant will be taken into account and the expected rental will be based on an independent assessment.

•Minimum income of £20,000pa after deductions (excluding the rental income), employed or self-employed.

•Up to 50% of the loan amount can be covered by the rental income from letting a room in the property. The balance of the loan must be covered by income.

•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.

•We recommend that the borrower take tax advice.

•Maximum Loan to Value is up to 85%.

If you would like to know more about our Rent a Room Mortgage, or any other aspect of our lending policy, please contact our sales team on 01225 475702 or at intermediaries@bibs.co.uk