LARGER INCOME STRETCH

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We have other methods of calculating the loan you can get rather than the standard income multiplier method. Affordability mortgages ignore income multipliers altogether, and have you considered renting out a room?

Some Mortgage Lenders these days will take the income that can be earned from renting out a room into account when deciding how much to lend. However, most lenders will make the decision to take rental income into account on a case-by-case basis.

In short, be prepared to accept most lenders will refuse point blank to include rental income in their calculations but it is possibly another option to consider if you are looking for an income stretch.

Beware though large mortgages come with big financial risks.

Apart from the obvious risk that you will be saddling yourself with a large debt, there is the risk that you won't be able to rent out your room.

According to the Association of Residential Letting Agents (ARLA) rental property is vacant on average for a month each year. To be safe it is best to presume that you won't be able to find a lodger for at least one if not two months in every twelve.

Another important consideration, when letting property, is to ensure you have a rental agreement, called an assured short hold tenancy agreement, in place.

This gives protection to both you and your tenants, especially in the event of rental arrears or needing to evict.

Remember, you may be able to benefit from the government's 'rent a room' scheme, whereby homeowners can charge rent of up to £4,250 tax free, within a given tax year. The rent charges have to remain below the £4,250 threshold if the payments received are to be completely non-taxable. Any amounts above this are taxable.

The scheme only applies to a property where it is the main or only residence and the person renting the room shares meals and facilities with the rest of the household.

If you can't persuade your mortgage lender to take rental income into account, don't give up hope, you may still be able to secure a larger mortgage.

In the past, mortgage loans based on three times salary was the norm, but today some lenders will loan more than four times salary. In addition, some lenders will look at disposable income when deciding how much to lend. In other words multiples of incomes are irrelevant.

Therefore, if you have few debts, or are in receipt of government tax credits, you might find that you can secure a larger loan.

We at MortgageMap have access to the whole marketplace so if you are looking for an income stretch we may be able to help. Please complete the relevant enquiry form.