Bath offers alternative to buying with friends

by Aaron Strutt

Jul 29 2011

Bath Building Society has responded to housing minister Grant Shapps' call for lenders to provide 'mates mortgages' by launching mortgages that take in to account the income from letting a room. The lender is introducing an Income Plus option on its three existing mortgage products, which allows for up to 50% of the loan amount to be covered by rental income from letting a room in the property.

Borrowers will need a 20% deposit and require a minimum income of £20,000.  The lowest mortgage that they offer is a three-year discounted rate at 3.79%, but you will need a 25% deposit to access this rate. The arrangement fee is 0.5% of the loan amount.

This type of mortgage innovation has been missing from market and it will help some borrowers get on the property ladder.

Here is an example of how the Income Plus mortgage works:

If an applicant earning £25,000 wants to buy a property at £180,000, they must have a minimum of a 20% deposit (£36,000). A mortgage of £144,000 would still be required and due to the income stretch this would be hard to achieve. However, under the Income Plus scheme and providing a room is let to a friend at £50 a week,  £96,000 would be covered by the borrowers income and the remaining £48,000 by the rent.

July 29, 2011