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Choosing between a one vs two bedroom apartment...

Hi,
I am in the process of buying a new flat in London. I am considering either a 1 or 2 bedroom. The 2 bedroom would stretch my finances a little but would still be in the range.

My parents are suggesting I should get a two bedroom to give scalability as I am not that young any more and may grow a bit soon. To get a 2 bedroom - it would probably make sense to rent out one of the rooms.

A mortgage advisor told me that it is not legal to rent out a room on your own property without mortgage lender approval and if you do have a lodger that you can collect maximum £95pw without declaring to the government. Is this true?

I understand the obvious tax implication (e.g., additional income that has to be declared) but in practice it seems to me London is full of landlords who sublet out a room to tenants. Is this all done under the table? Does the tenant have rights (e.g., difficult to kick him out)


Many thanks

Comments

  • seven-day-weekend
    seven-day-weekend Posts: 36,755 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Details of rent-a-room scheme:

    http://www.hmrc.gov.uk/individuals/tmarent-a-room-scheme.shtml

    This applies to lodgers i.e. those who rent a room in a house/flat where the landlord is resident; and they have very few rights.

    Try www.landlordzone.com for further advice.
    (AKA HRH_MUngo)
    Member #10 of £2 savers club
    Imagine someone holding forth on biology whose only knowledge of the subject is the Book of British Birds, and you have a rough idea of what it feels like to read Richard Dawkins on theology: Terry Eagleton
  • reset1
    reset1 Posts: 33 Forumite
    Part of the Furniture 10 Posts Name Dropper Combo Breaker
    I would go for a two bedroom, can easily rent it out one room to a lodger. Also if you have child later you don't have to think about moving so quickly again.
  • ognum
    ognum Posts: 4,879 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    Most people I know who have bought one bedroom wish they had bought two!!
  • BitterAndTwisted
    BitterAndTwisted Posts: 22,492 Forumite
    10,000 Posts Combo Breaker
    pred02 wrote: »
    Mortgage advisor told me that it is not legal to rent out a room on your own property without mortgage lender approval

    That's absolute codswallop

    and if you do have a lodger that you can collect maximum £95pw without declaring to the government. Is this true?

    That part is true.

    I understand the obvious tax implication (e.g., additional income that has to be declared) but in practice it seems to me London is full of landlords who sublet out a room to tenants.

    They are not sub-letting and the people who live in the properties with them are not tenants, they are lodgers.

    Is this all done under the table? Does the tenant have rights (e.g., difficult to kick him out)

    Tenants have rights but lodgers have few, if any. The main things to bear in mind are that you must continue to occupy the property permanently yourself and should you choose to take in a lodger at some point in the future is to have them sign a LODGERS agreement and not a tenancy agreement.
  • sorry to be thick but what is the difference between a tenent and a lodger?
  • Andy7856
    Andy7856 Posts: 260 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    i agree with most on here, - and would personally go for the 2 bed, you will really appreicate the extra space, and worse happens get a lodger or a exchange student to pay the bills for a while.

    Ok it may push you, but I'd be willing to make cut backs elsewhere (eg no Sky subs/cheaper phone deal etc)

    Good luck anyway!
  • Yorkie1
    Yorkie1 Posts: 12,069 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    sorry to be thick but what is the difference between a tenent and a lodger?

    A lodger is someone who has non-exclusive use of a room in the LL's house while the LL is still living there.

    They have very few rights and can be asked to leave quickly.

    A tenant lives in the LL's property (either sole occupation of a room plus shared areas, or the whole property) but the LL does not live there too. A tenant has lots of rights including protection from eviction without going through the court process first.
  • pred02
    pred02 Posts: 220 Forumite
    Part of the Furniture 100 Posts I've been Money Tipped!

    So according to this are exempt up to £4250 per year however over that amount (if you charge higher rent) you must pay taxes at 40%?

    Are there any issues with the mortgage companies if you rent out a room?

    Thanks
  • Strapped
    Strapped Posts: 8,158 Forumite
    Listen to your parents and go for the 2 bed.
    They deem him their worst enemy who tells them the truth. -- Plato
  • GDB2222
    GDB2222 Posts: 26,304 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    pred02 wrote: »
    So according to this are exempt up to £4250 per year however over that amount (if you charge higher rent) you must pay taxes at 40%?

    Are there any issues with the mortgage companies if you rent out a room?

    Thanks

    You pay tax at your top marginal rate, which may not be 40%.
    No reliance should be placed on the above! Absolutely none, do you hear?
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