Bath Building Society has recently launched a mortgage scheme that takes into account the income generated from renting a room in the property to increase the amount they will advance. This scheme is called Income Plus.
In this scheme Bath B/S take into account that you can earn up to £4250 per annum with no tax liability under the HMRC Rent a Room Scheme. This additional income is then taken into account to increase their lending compared to a traditional lender.
The basic details are as follows:
- Up to 50% of the loan amount can be covered by rental income from letting a room in the property. The balance of the loan amount must be covered by income
- The amount being covered by rent must be no more than 3 x the borrower’s income
- A minimum of 20% deposit is required.
- Minimum income of £20,000.
- Tenancy under licence, borrower to take tax advice.
Based on an applicant earning £25000 who wants to buy a property at £170,000 with a 20% deposit. The loan amount of £136,000 would be outside most lenders criteria. However by letting a room at £65 per week under Income Plus this would cover £63,000 of the loan, leaving £73,000 to be covered by income.
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