Share with a stranger: the lodgers who won't cramp your style
Laura Harding reports on the flexible arrangements that allow borrowers to rent out a room, pay the mortgage, but enjoy their own space
Sunday 11 May 2008
Living with someone you've never met before may seem unappealing, but for hard-pressed mortgage borrowers, bringing in a lodger could be one of the easiest ways of ensuring financial survival.
Homeowners are allowed to rent out a spare room and generate a tax-free income of up to £4,250 a year – equating to a monthly rent of just over £350. It can be a single room or the whole floor of your house, as long as it's furnished and not a separate flat that you rent out, in which case you would have to pay tax on your earnings.
The rental sector is particularly buoyant at the moment as many people cannot get a mortgage to buy their own place, so there are rich pickings for prospective landlords.
And the arrangements can be flexible, giving homeowners plenty of time to have the house to themselves. It's possible, for example, to rent out a room just from Monday to Friday – possibly to tenants who have a job in the area but don't want to move there full-time.
Judy Niner set up Mondaytofriday.com , a website that pairs householders with people seeking somewhere to stay during the working week. She says the benefits are not just financial: "There is also the social aspect: the lodger often becomes friends with the homeowner and they offer company for older people with 'empty nest' syndrome."
Some people will be able to take on tenants for an even shorter time. Edinburgh residents can charge a fortune for a room during the annual festival, for example, as can homeowners in Cowes, Cheltenham or Wimbledon.
A note of caution, though, needs to be sounded. Michael Flynn, content editor at the FindaProperty.com website, advises you keep track of your finances in order to avoid slipping over the £4,250 limit and being forced to pay tax: "If you exceed your allowance then having a lodger could end up increasing your tax bill. Make sure you stay within the boundary or it won't be worth it."
Mr Flynn adds that you should check out your new lodger through references and identity checks. "It is really important you screen the people moving into your house. You must also inform your insurers and mortgage lenders before anyone moves in. Your insurance company, for example, may wish to adjust your premium."
The tenantverify.co.uk website will run a basic credit check of prospective tenants for £15.88. Alternatively, Experian offers a similar service for £14.50 through its website checkmytenant.com. But data protection rules mean the information on offer is strictly limited. "We are only allowed to give out data that is already in the public domain," says James Jones at Experian. "So for example, landlords will be able to see if their prospective tenant has been made bankrupt, has a county court judgment or appears on the electoral roll." Potentially important information, such as being several months behind with credit card repayments, is not available.
The information website landlordzone.co.uk says that one advantage of taking on a lodger, rather than renting out your home, is that they have far fewer legal rights, making it relatively simple to remove an unsuitable house guest. After you tell them to leave, they have no right to stay because they do not have the same security of tenure as someone who rents an entire property. The website does, however, encourage landlords to draw up a contract with lodgers since there are no statutory rules governing this area.
Then if the arrangement doesn't work out, you can always change your mind.
'If you make the right choice, there aren't any downsides'
Diana Grace Jones, 66, a teacher from west London, decided to look for a Monday-to-Friday lodger after previously having let a room full-time. "You have a responsibility to provide a home for [someone who's there all week], and I didn't really want that any more, but I had the spare room and wanted to use it. I also wanted to have it free at weekends with no obligations."
The £252 a month rent she charges, well below market value, helps with the bills too.
Her lodger, Thomas Rice, 23, works in fashion logistics and spends the weekends at home in Leicester.
Diana says: "I enjoy making someone's life easier – the commute is ghastly. When I first met Thomas, he was terribly tired.
"The most important thing," she adds, "is to decide if you want a young lodger or a middle-aged one. If you get it right, I don't think there are any downsides. The money helps and I'd take in another person if he moved out."
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
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