I am in a mess, not sure what I can do re rent a room

narnia2000

Trying to cut this short: I was with ex bf for 4 years, had to sell former matrimonial home, ex bf wanted to buy a house with me. We fell in love with current residence, at the time I could have bought a house cash, not this one though. Ex bf had previously been made bankrupt and was unemployed, so I ended up with a self certification mortgage in my name. A couple of years down the line, bf left, I put down a hefty deposit on this house, but was left with a payment of £808 per month, thus far my savings have covered it, I work p/t but my wage is £600 per month. As you can see the numbers don't add up.
I have tried to find another job, or one which ties in with current job.....there just isn't much out there.
I am trying to complete jobs on the house, and have an offer from someone who wants to rent a room from me. However he has applied for sickness benefit, and currently applying for housing benefit, so would be DHSS.
At the moment I get 25% reduction on my council tax for single occupancy, I need to know if I will lose this?
I also need to know what housing benefit would pay up for him renting a bedroom, bathroom, shared lounge, shared kitchen, shared laundry room.
I have read up about the government rent a room scheme, and it would help me to be able to do this, I am just not clued up on any of this, my savings are running out, I don't know which route to go down, any suggestions are welcome. Tx.

Fire_Fox

DHSS has not existed for decades, it is now the DWP and local councils who administer benefits. You cannot calculate the rent based on what benefits your friend can get, you need to look at market rent for lodgings otherwise it may be deemed a 'contrived tenancy' and your tenant will get nothing. You will need to supply you rtenant with a contract in order for him to claim benefits, and these are only ever paid in arrears - he needs to find the money to pay you in advance and possibly a damage deposit too. You should register with the Inland Revenue for the rent-a-room scheme, and you can take a little over £4K in rent before you need to pay any tax. You will indeed lose your single occupancy discount - it is up to you whether you opt to split the bills with your new housemate or make the rent all inclusive - the latter is more common.

You will also need to inform your buildings and contents insurers (expect this to go up), and possibly your mortgage lender too. Are you on an interest only mortgage? Apply for this if not as you must leave yourself some savings in the event you are unable to work: the state will not pay your mortgage for the first three months. Have you looked to see if you are entitled to any state benefits in your current situation? I would research support for mortgage interest, council tax benefit and working tax credits. You probably won't get it all paid, but even a little will help.

narnia2000

You can see how clueless I am at all of this. My mortgage is repayment, however fixed at 4.65% until Feb 2011. My prospective tenant isn't a friend of mine though, it's just that I'm unclear as to how much rent allowance he will get from housing benefit, having an idea of amount would allow me to decide whether this would be a good option for me.
Somehow I need to pull in an extra £600 per month to enable me to cover my expenses, I am fortunate in that I do have spare rooms, and equity in the house too. At the moment my thoughts are all over the place regarding whether to market the house or rent the rooms out to cover the shortfall. I have looked at an extra job, there just aren't any, I can't claim tax credit as I only work 20 hours per week, not 30 as required because I have no children. I have tried to get extra hours at work but no joy.

BitterAndTwisted

Look on your Local Authority's website and check what their Local Housing Allowance is for a property in your area. Most LA's will pay an absolute maximum based on a house-share rate for those under 25 years of age. The allowance will be higher for someone over that age. You mentioned that your have spare rooms, plural, so you could take in more than one lodger. Depending on where in the country you are I'd say that with two lodgers you might be able get £600 a month in rent from two people. Are either of the rooms big enough for a couple, then maybe you could get three lodgers? Mind you, it's very, very challenging being outnumbered in your own home but needs must. Lodgers who share a property with the owner have far fewer rights than tenants and they are only living there as long as you say so, so if someone doesn't suit it's quite easy to get them to leave if that's what you want to happen.

Fire_Fox

If this person is not a friend I cannot see why you would choose to let a room to someone on benefits? I know it sounds harsh but you must think of yourself - my understanding is that employment and support allowance is VERY difficult to to maintain, people with serious conditions (cancer, undergoing chemo! :eek:) are getting taken off and the appeals take months. Can your tenant pay you rent then? Will you evict him?

You don't have to justify yourself about the job situation, I have been unemployed for eight weeks. Have you looked at claiming council tax benefit or support for mortgage interest? I would have been entitled to CTB when I was working part time and I don't have any children.
www.entitledto.co.uk
http://www.jobcentreplus.gov.uk/JCP/Customers/WorkingAgeBenefits/Dev_016128.xml.html
Then I would advertise for a working tenant or two, taking up references and a damage deposit. Consider taking the smallest bedroom yourself to maximise rent.
http://www.spareroom.co.uk/

BitterAndTwisted

Fire Fox is right: find yourself a working lodger or two. Pay particular attention to the taking up references and a decent deposit part. Ensure you have a name and address of their next-of-kin and of their employer/s. You can receive about £5k per annum on the Inland Revenue's Rent-A-Room scheme before you have to pay tax on it

00ec25

BitterAndTwisted wrote: »

You can receive about £5k per annum on the Inland Revenue's Rent-A-Room scheme before you have to pay tax on it

It is £4,250 per year (that is not about £5K)

ie. £354.16 per month tax free: but you must pay tax on every penny over this amount and cannot offset any expenses (including any share of the utility bills) against this

the alternative is you opt out of the rent a room scheme and do it the normal way, ie total rent received - expenses = taxable amount

the choice between the 2 options is simple maths and you can change your choice each yax year

sammyjammy

Remember as well that if your lodger is on ESA/IB (what used to be sickness benefit) they are likely to be home all day every day, how would that sit with you I know it would drive me mad!

Jowo_2

See the Shelter website for information on the various schemes available to help struggling homeowners and how to avoid or deal with mortgage arrears.

See the Landlordzone website for information on the rent-a-room scheme and the importance of proper lodger screening (credit check, ID check, previous landlord references, etc)which you should do before you let a stranger into your house. The best lodgers are working ones or students (those with drive/commitments) and not the unemployed or those with personal problems - don't ever take pity on someone as this is a very poor basis for a landlord/lodger relationship.