Can I use income from renting out a room?

Renting out a spare room can meaningfully help with the mortgage, and it is increasingly common. But lenders treat boarder or lodger income cautiously, because it is informal and can be harder to verify than a formal tenancy. Here is how lenders tend to view it.

Why lenders are cautious

Boarder or lodger income, where someone rents a room in your home rather than leasing a whole investment property, is often informal and can be inconsistent. Because it may not be backed by a formal lease and can stop if the arrangement ends, many lenders are cautious about counting it toward serviceability.

Not all lenders accept it

A number of lenders simply do not count boarder or lodger income at all, treating it as too informal to rely on. Others may consider it under certain conditions. So whether this income can be used depends heavily on the lender, and it is not something to assume.

Those that consider it want evidence

Lenders that will consider boarder income generally want evidence that it is real and regular, such as a written board arrangement and a history of the payments being received into your account. The more the arrangement looks documented and consistent, the more comfortable a lender can be.

It may be counted only partly

Where boarder income is accepted, a lender may count only a portion of it, reflecting its informal and variable nature. So even where it can be used, it may not boost borrowing power by the full amount received, depending on the lender.

Relatives versus non relatives

The nature of the arrangement can matter, including whether the boarder is a relative or a non relative. Lenders may treat these differently, and the details of your specific arrangement affect how, or whether, the income is counted.

Tax and other implications

Renting out part of your home can have tax and other implications, which are separate from the lending question and depend on your circumstances. Those should be checked with your accountant, since they are not a lending matter and are specific to you.

Check which lenders will consider it

Because treatment varies so widely, the useful step is to find the lenders that will consider boarder income and on what terms. A broker can check this for you and set realistic expectations, usually at no cost to you. This is general information, not advice, and tax questions are for your accountant.