We want to get a lodger – will our mortgage rate change?

My partner and I have signed the mortgage offer on a two-bed flat, but have yet to tell the lender our rental plans

Q I am about to buy a property with my partner and have agreed and signed the offer on a fixed-rate mortgage.

We are buying a two-bedroom flat and want to rent one of the bedrooms out. When do we have to notify our lender, and will the mortgage rate change? IP

A You should check with your mortgage lender before you take in a lodger to make sure that you would not breaching the terms of the mortgage you have applied for. Assuming that your lender doesn’t mind you having a lodger – as is the case with most lenders – it is unlikely there will be any change to your mortgage rate.

If you were to move out of your flat and let the whole of it to a paying tenant, you would need to get a “consent to let” or convert to a buy-to-let mortgage and pay a higher rate of interest. But simply taking in a lodger while still living in the flat does not require a change to the mortgage rate you pay.

Taking in a lodger can, however, affect your buildings and contents insurance, so you need to check with your insurers. Assuming your flat is a leasehold property, you should also check that the lease doesn’t prohibit you from having a lodger.

Finally, if you plan to charge your lodger more than £7,500 a year (£625 a month), you must also inform HM Revenue & Customs. Since 6 April 2016, under its rent-a-room scheme, the first £7,500 of rent you from a lodger is tax-free (up from £4,250 in previous tax years) but you would have to pay tax on any rent over the £7,500 limit. If you each get half the rental income, you each get a tax-free amount of £3,750.


Virginia Wallis

The GuardianTramp

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