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Lodger Mortgages

Can lodger income be declared for a mortgage application? Get the right advice here

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: June 1, 2022

What are lodger mortgages?

This is where your bank or mortgage provider takes into account existing or anticipated rental income from a lodger to boost your mortgage terms and declarable income.

Few UK providers consider income from lodgers for mortgages. Many feel that it is too risky but there are some exceptions to this general rule.

Is it more difficult to get a mortgage with lodger income?

It can be, as some lenders are wary of offering mortgages under these circumstances.

Certain providers will consider this a risky proposition. Renters might not stay for the full term or may default on rental payments, making rental income unpredictable. With this in mind, a number of lenders will refuse to add income from renters to your gross earnings when they calculate your affordability.

On the other hand, there are a number of providers who may offer lodger mortgages. Give us a call on 0808 189 2301 or make an enquiry so we can connect you with one of the experts we work with who specialises in these type of products.

How do I declare lodger income for a mortgage application?

First you will need to find out which mortgage lenders accept lodger income on a mortgage application – one of the whole-of-market brokers we work with can help with this.

Next, you will need to think about how you’re going to prove your rental income to the lender.

Most lodger mortgage providers will request the following documents…

  • The last two to three years’ tax returns
  • A copy of your lease agreements
  • Your last three months’ payslips
  • A letter of verification from your employer – preferably a P60
  • Your passport or driver’s license
  • Bank statements covering the last three to six months

What is the eligibility criteria for a mortgage with lodger income?

Your chance of getting a lodger mortgage usually stands or falls on the results of your affordability assessment.

Even lenders who do accept lodger income are unlikely to offer you a mortgage if you’re unemployed and have no other sources of income. In fact, most lenders who accept lodger income stipulate that your total employed earnings must be at least £20,000 to £25,000 a year.

How do lenders add lodger income to their mortgage calculations?

Most lenders who offer lodger mortgages add 75% of your rental income to your total income to calculate your total debt-to-income ratio.

The debt-to-income ratio compares the minimum monthly payments you own on recurring debts to your gross monthly income. The lower your debt-to-income ratio, the more favourable your mortgage terms and rates you’re likely to end up with.

Which mortgage lenders accept lodger income?

In Britain, very few banks and Building Societies accept lodger income because of the perceived risks involved.

Santander is one of the very few that accepts – at underwriter discretion – your verified income from up to two lodgers, providing the money has been paid and can be shown on a bank statement for the last three months.

Taking a lodger if you already have a mortgage

Some mortgage terms prohibit you from taking a lodger. Make sure you read the small print on your contract carefully to see whether or not you’re allowed to rent, because otherwise you could find yourself in trouble with your mortgage lender.

If your contract allows you to rent out, you may be able to remortgage and declare the rental income. That is if you find a mortgage provider who accepts your application.

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How can I improve my chances of getting a mortgage with a lodger?

You could increase your chances by considering the following options:

  • Increase your deposit – the larger your deposit, the lower your repayment amount
  • Sign up for a longer term – terms range from 25 years to 40 years. The longer your term, the less you pay each month. On the other hand, you accrue greater interest at the end
  • Joint payment – if you have a partner who’s willing to chip in, the double income may persuade the provider to consider your lodger income as well
  • Lower your outgoings and improve your credit report

Speak to an expert

Finding a mortgage lender happy to consider taking into account rent from a lodger can be quite an arduous task. This is where we can help!

The advisors we work with can provide the expert knowledge required in this specific area of mortgage lending and will be able to offer the guidance you need to find a solution which suits your requirements.

Call us on 0808 189 2301 or make an enquiry to get started.

Ask a quick question

We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.

Ask us a question and we'll get the best expert to help.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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