The mortgage works by taking account of the £4,250 tax-free allowance allowed to those who let a room in their residential house. It allows borrowers to secure a mortgage that takes into account the income earned from letting out a room.
The loan is flexible and allows borrowers to overpay when they have a tennant to reduce the loan and cover for rental voids. The mortgages are available either as a two-year fixed rate with an initial rate of 4.64 per cent, or a two-year discount tracker with an initial rate of 3.99 per cent.
David Bitner, technical manager at The MarketPlace, said: "This product is a simple solution that recognises this very common practice by simply adding the tax-free rental income to the borrowers own income. Many lenders are not comfortable with allowing borrowers to rent a room and this is a practice which is often done without the lender’s knowledge, so this new scheme will prove a huge benefit to many people."
