More than 1.5 million borrowers facing difficulty with mortgage repayments are thinking about renting out a spare room, according to a survey carried out by Abbey. The bank's research indicates that 388,000 people currently have a lodger, charging an average rent of £289 per month. That amounts to £3,468 extra per year, which is non-taxable for those who participate in the Government's "rent a room" scheme. The scheme allows for up to £4,250 gross rental income to be made in a year, tax-free. The scheme applies to those who receive income from renting out furnished accommodation in their own home.
The number of buy-to-let deals available for property investors. According to moneysupermarket.com, the figure has fallen off a cliff, declining 93 per cent in just 12 months. The financial product website calculates that there are now 300 buy-to-let mortgages, and most of them come with significantly tighter criteria than landlords used to enjoy. You typically need a deposit of at least 25 per cent, and the rent that your property generates will need to equate to 125 to 130 per cent of your monthly mortgage repayment. Some would call this punitive; others simply prudent.
GO FIGURE... $1
Amount paid for the "nicest house on the block". As an example of just how bleak the US housing market is looking, a repossessed two-storey property on the east side of Detroit has sold for a dollar (about 50p). The property, which was bought for $65,000 in November 2006, was described by the neighbours as the best on the street. The bank that repossessed the house was faced with a bill of thousands of dollars in back taxes and sold it for a token sum. But the buyer only agreed to close the deal once the bank had promised to pay all of her costs, the sales commission and the taxes – totalling about $10,000.
Paula John is editor-in-chief of Your MortgageReuse content