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Lodger mortgages

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 13, 2023

Lodger mortgages

What is a lodger mortgage?

As mortgage brokers, we often get asked about lodger mortgages. Rental income seems to be becoming more and more popular as the price of living goes up. We have a few mortgage providers lending and offering mortgage advice to people who rent a room.

The UK’s property prices are on the rise. It makes sense for people to get some financial help. If you don’t have spare rooms, consider adding another adult to the house to pay the mortgage.

It’s not as easy as announcing the space and waiting for the money to come in. However, there could be implications for your mortgage.

Your bank or mortgage provider will consider lodgers’ expected or actual rental income to increase your mortgage terms and declarable income.

UK mortgage providers are not likely to consider income from lodgers. Although it may seem risky, there are exceptions.

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Is it harder to get a mortgage if you have lodger income?

This is possible since some lenders may not offer mortgages in these situations. As mortgage brokers, we have several lenders to introduce you to.

This is a risky proposition for some providers. This could lead to renters not staying for the entire term, defaulting on rental payments or making income uncertain. This is why many lenders won’t add renter income to your affordability calculation.

Many providers may offer lodger mortgages. Call us today for mortgage advice.

Enquire to connect with one of our experts specialising in these rent-a-room products.

Can I allow lodgers on to my mortgage?

It is worth reviewing your mortgage terms to ensure that you have a lodger within your loan conditions. However, it is very rare for a lender to object to your lodger.

Remember that your mortgage provider isn’t the only thing to consider. A lodger can mean that your insurance policy may need to be changed, and earning income has tax implications. The government rent-a-bedroom scheme can cover the former quite well – we’ll discuss this later.


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Can I apply for a mortgage with lodger income

You can be ‘allowed’ to lodgers as part of your mortgage. This allows you to use the lodger as an additional income source when applying for a mortgage. It will improve your affordability and allow you to get better deals or larger loans.

What is the difference between a lodger and a tenant?

For your mortgage, you mustn’t confuse a lodger and a tenant. A lodger is someone who lives with you on the property while a tenant rents it out to them. The former can be done on a temporary lease, but the latter requires a tenancy agreement.

A residential mortgage will not be applicable if you plan to let the whole property, rather than just a single room.

Mortgages to buy-to-let

A buy-to-let mortgage is required if you plan to invest in a property to let. These are often interest-only mortgages used to invest in a second property. They are very different from a residential mortgage for the first property.

Each lender will get different mortgage deals, including terms, rates, and loan-to-value.

Our specialist team will help you to understand all aspects of being a landlord if you’re considering buying a buy-to-let mortgage.

Modifying the terms of your mortgage

If you have a residential mortgage and wish to modify the terms to permit you to rent out your home to a tenant, you can either change your mortgage from residential to buy to let or give your consent to let your existing mortgage.


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Using lodger income to improve your mortgage deals

We work with specialist lenders to help us make informed decisions about your mortgage size and affordability. They can use additional income, such as from a lodger, to better understand your finances.

It can be difficult to convince even the most flexible lender to accept a supplement from a lodger as a regular income source due to the short-term nature of lodging.

Your situation will play a major role in determining the amount of your mortgage. Your lodger could be an adult relative who wants to live with you for some years and can show it. Or you might have a contract that you can accept from the mortgage provider. Specialist lenders may be willing to accept it as part of your overall income in these cases.

However, it is important to note that the closer you are to a permanent lodger, the more likely the lender will want to ensure that your mortgage contract includes that person. Sometimes, the lender may expect the lodger to be the full mortgage owner.

For personalised advice, talk to a mortgage advisor about your particular situation.

Understanding the rent-a-room scheme and paying tax

You can make as much as £7,500 per annum from a lodger through the government’s rent-a-room program without paying any tax or declaring to HMRC.

This makes it easy to have a lodger for someone who charges less than £144 per week for a place in their home.

However, if your rent exceeds the rent-a-room scheme threshold, you must file the money via a tax return as self-employed income. It may be worth seeking the advice of an English or Welsh accountant for a complete understanding of your situation.


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Flats and other leasehold properties

If you have a leasehold agreement that prohibits you from subletting a part of your property, it could be because your property isn’t freehold. Although your mortgage provider may allow you to use the financial assistance of a lodger, the leasehold may say otherwise.

Before allowing a lodger to stay in your flat or similar property, make sure you read the terms.


You can protect your investment by purchasing building insurance. This insurance will cover you in a fire, flood, or natural disaster. It is included in your agreement with the mortgage provider.

Insurers may not consider you a lodger if you allow an adult to live in your home. This could cause the insurance to be invalidated. If you have questions or concerns about your insurance, it is important to understand its terms and conditions.

Your credit score and tenants

Although many myths suggest that they can affect credit ratings, living with someone does not mean they will. Bad credit won’t affect your ability to remortgage or your mortgage.

Keep in mind, however, that if your lodger relies on you for income to pay your mortgage, bills, or other financial obligations, you could find yourself in a position where you need to provide support for your lodger in case they are unable.

Always be ready for a time when you cannot communicate with your lodger. You must also ensure that your mortgage payments are covered, even if your lodger cannot provide them. Your credit history, future applications, and credit score are all at risk. Failure to pay your mortgage repayments could result in your home being taken away.


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How can I declare lodger income in a mortgage application?

First, you must determine which mortgage lenders will accept lodger income for a mortgage request. One of our whole-of-market broker partners can assist with this.

Next, consider how you will prove your rental income to the lender.

Most lodger mortgage lenders require the following documents:

  • Tax returns for the last two-three years
  • A copy of your lease agreements
  • Payslips for the last three months
  • A letter from your employer verifying your employment – preferably a P60
  • Passport or driver’s licence
  • Statements from banks covering the past three to six month

What are the eligibility requirements for a mortgage with lodger income and a mortgage?

The results of your affordability analysis will determine if you are eligible for a lodger mortgage.

Lenders who accept lodger income will not offer you a mortgage if your income isn’t sufficient. Most lenders accepting lodger income require that your annual earnings amount to at least £20,000 to £25,000.

How can a mortgage lender add lodger income into their mortgage calculations?

To calculate your total debt to income ratio, lodger mortgage lenders will add 75% to your rental income.

The ratio of debt to income is the minimum monthly payment you make on recurring debts compared to your gross monthly earnings. Your mortgage rates and terms will be more favourable if your debt-to-income ratio is lower.


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What mortgage lenders will accept lodger income?

Due to the risks associated with lodger income, there are very few British banks and Building Societies that accept it.

Santander is one of the few banks that will accept your verified income from up two lodgers. However, the money must have been paid and can be shown in a bank statement for three months.

If you have a mortgage, consider not taking a lodger

You may not be allowed to take a lodger under specific mortgage terms. You could be in serious trouble with your mortgage lender if you don’t read all the fine print.

You may be allowed to rent out your property if you have a contract. This is only if a mortgage provider accepts you.

What can I do to increase my chances of getting a mortgage with a lodger?

Consider these options to increase your chances of success:

  • Your deposit should be increased – the greater your deposit, the lower your repayment amount
  • You can sign up for a longer term, from 25 to 40 years. You pay less each month if your term is longer. However, you will earn more interest in the end.
  • Joint payment – If you have a partner willing to contribute, the double income might convince the provider to consider your lodger income.
  • Reduce your outgoings, improve your credit score

Talk to expert mortgage brokers now

It can be challenging to find a mortgage lender willing to consider rent from lodgers. We can help you!

Our advisors can offer expert knowledge in the specific area of mortgage lending. They will also be able to guide you to help you find the right solution for your needs.

To get started, contact us today to get started with your application.


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