Renting a room may increase your borrowing power

Many people can find the first year, even two of their mortgage very demanding on the purse strings. A mortgage is a huge responsibility to undertake and entering into one generally means some lifestyle changes for the majority of us.

When we take on a mortgage we have entered into a legal and binding contract with our Lender and in this respect we must ensure that our side of the deal is upheld and that we maintain strict control over the repayment of our mortgage. Sometimes, first time buyers toy with the idea of taking on second jobs in order to be able to maintain their lifestyle while keeping up their mortgage repayments. In other cases, people try to borrow beyond their means so as to be able to afford their ideal home and then end up having to stay in the whole time.

Neither of these options are sound solutions. As human beings we generally want the best of both worlds. We want to be able to afford our own homes and not to have to make sacrifices in any other aspects of our lives.

Sometimes, things are not that simple. Good will unfortunately, is not enough to ensure that we qualify for the mortgage we require.

Lenders in the most part are rigid when it comes to income criteria in relation to the mortgage amount that we can qualify for and therefore our choices can be limited. This can be frustrating, as sadly we cannot just increase our salaries in order to qualify for a higher mortgage amount.

This is where a small amount of flexibility on both your part, and the part of the Lender, can go a long way in respect of increasing your loan amount.

Some Lenders will take into consideration the fact that you are going to rent out a room, or rooms, in order to help pay for the mortgage. The Lender may consider that you will be sharing the mortgage repayments in respect of the property as you will be generating additional income in the form of rent.

Lenders differ when it comes to the approach that they take towards the amount that they will allow you to borrow on the strength of this rental income and they will be looking for evidence of same prior to loan sanction. This could be in the form of rental income verification from an auctioneer for example.

It is therefore worth mentioning to the Lender (at the onset of your application) that it is your intention to have tenants in your new property, so the Lender can advise if they are prepared to sanction a further loan amount on this basis.

Once the decision has been made financially to take in tenants, it is important to look at what could be the downsides of sharing your new home. Do you really relish the thought of a stranger coming to live in your new home? Not everyone would find it easy or even remotely enjoyable to share their space with a stranger or even a friend. We have all heard horror stories of housemates coming to blows because of incompatible lifestyles at close quarters.

There are also the insurance implications of taking in a tenant to your property. As a landlord, you would owe your tenant a duty of care and your insurance policy would have to be structured in a slightly different manner to normal in order to ensure that all parties living in the property were adequately insured.

So, renting out your new home is not just about money. There are safety aspects to be considered as well. It is important to source your tenant from a reliable agency and where possible to get references from previous landlords or even from an employer.

Take your time over interviews with potential tenants as you meet the. You will be sharing a home with these people seven days a week so be in no rush to decide there and then if the person is suitable. If you are unsure about the person ask for further information and references from them.

Do not rush into anything and do not feel pressure in relation to choosing your new housemate. Ensure that both you and your new tenant go through the terms upon which the property is being rented so as to make things clear at the onset and prevent future problems.

Be inquisitive about the person and remember with a little common sense and checked references you could create a perfectly civilized living arrangement that will help pay your mortgage.