The combination of frozen interest rates (or in some cases increasing mortgage rates if you are on a SVR) and increasing rents has made it necessary for many home buyers to consider letting out a room in their home to help meet their mortgage costs.
In some areas, where the letting price is quite high, simply renting out one room may be the solution to meeting a mortgage as it would allow them to use the income from letting the room to pay for their home mortgage and still have a surplus to help loosen up the budget a bit.
Of course, how much of a benefit a letter is going to be when compared to the costs of fixed mortgages will depend on the region that the home is in as well as the tenant and the buyer expectations.
Home owners that live in regions where the house prices have fallen will likely find that they have rental surpluses whereas those in the south that are still paying higher mortgages since their properties are valued at higher prices will not find that the rental income helps as much.
The government is promoting renting a room as part of their new rent a room scheme that allows for rental income of up to £4,250 per year or £354 per month to be tax-free. Therefore, those that rent a room can help make their mortgage rates more affordable without paying any taxes on what they receive so long as they do not receive more than the scheme’s limits.
It should come as no surprise therefore that Santander reported that about one million homeowners are letting out rooms in their homes to help cover their mortgage costs.
SpareRoom.co.uk did a survey that took a look at the cities and towns in the UK where homeowners could consider renting out a spare room and be able to live mortgage free taking into account the average home price in many different UK cities and towns and comparing it to the average rental unit price.
It found that the best area for covering one’s mortgage with a renter is in Hull where those with a £90,000 mortgage could stand to profit by about £1000 if they charged about £341 per month for the rental. Other top areas include Manchester, Blackpool, Glasgow, Stoke-on-Trent, and Belfast.