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How to shave 29 per cent off your mortgage

Friday, 2 September 2011 12:27 PM

Renting out a spare room for five years while paying an offset mortgage could shave 29 months off a homeowner’s repayment period, according to figures released today.

By using monthly rent to make mortgage overpayments, the typical homeowner could shave nearly two-and-a-half years off their mortgage and save over £1,028 in interest payments, said First Direct.

The Government's Rent a Room scheme means there are no tax implications for letting a furnished room in your home if your profits are under £4,250 per annum, so homeowners with space to spare could earn up to an extra £354 per month to put towards their mortgage costs.

The scheme is open to those that own their own home and those living in rented accommodation. However, tenants are advised to check the terms of their lease to see whether they are allowed to take in a lodger.

According to the Direct Gov website, a lodger can occupy a single room or an entire floor of your home. However, the scheme does not apply if your home is converted into separate flats that you rent out.

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