New mortgages launched for 'rent a room' scheme

February 24, 2016 by Brendan O'Neill

Borrowers

Bath Building Society has recently launched a new mortgage product, ‘rent a room’, aimed specifically for those interested in renting out a single room of their property to a friend or family member.

The mortgage would be available to borrowers who have a spare bedroom and would like to rent it out. The mortgage being introduced by Bath Building Society makes it possible for borrowers to borrow slightly more, but use the rental income to pay the mortgage.

The rates and terms of the new product will be the same as the existing 95% LTV parent assisted products and the standard mortgages for residential purposes. If a borrower has some security, the Loan To Value will be up to 95%, but without any collateral, the maximum amount loaned out will be 85%.

Dick Jenkins, the Chief Executive of Bath Building Society, said that more people are now realising that it is more expensive to rent a property than buying your own home at the moment. He adds that a number of young buyers would be happy to rent out a room to a friend, making it easier to afford the repayments.

The agreement will be dependent on independent assessment and only having one tenant. Income of at least £20,000 is required to be eligible for the product, which is before rental income. The rent can cover up to half the mortgage payment, while the amount of the mortgage being covered by the rent can be up to four times the borrower’s salary. A CeMAP qualified mortgage adviser will be able to provide more advice.