Help to Buy Equity Loan and Rent a Room Scheme

it02s28 · 15 October 2019 at 9:32PM

Hi all,

I am considering using the funds in my Lifetime ISA to buy a new-build apartment with the assistance of a Help to Buy Equity Loan.

I have the option to buy either a 1-bed for £150k or a 2-bed for £250k and I'm steering towards the latter, with the intention of renting a room out to a lodger which I have estimated could generate a rent (on an all-inclusive basis) in the order of £500pcm - equating to approx 50% of the monthly mortgage, which is attractive.

I am fully intending on living in the property and aware that I may be required under the terms of the long leasehold agreement to obtain landlord's (the freeholder's) consent.

If I decide to buy the 2-bed, get a lodger in on a formal 6 month Assured Shorthold Tenancy agreement and obtain consent from the freeholder, is there any reason why this wouldn't be permitted under the terms of the Help to Buy Equity Loan?

Could I also make use of the Rent a Room tax scheme? I see that it would have to be let on a furnished basis, which is how I intend to let the room out in any event.

All of this is very new to me, so any advice is much appreciated.

Thanks

[Deleted User] · 15 October 2019 at 9:38PM

it02s28 wrote: »

Hi all,

I am considering using the funds in my Lifetime ISA to buy a new-build apartment with the assistance of a Help to Buy Equity Loan.

I have the option to buy either a 1-bed for £150k or a 2-bed for £250k and I'm steering towards the latter, with the intention of renting a room out to a lodger which I have estimated could generate a rent (on an all-inclusive basis) in the order of £500pcm - equating to approx 50% of the monthly mortgage, which is attractive.

I am fully intending on living in the property and aware that I may be required under the terms of the long leasehold agreement to obtain landlord's (the freeholder's) consent.

If I decide to buy the 2-bed, get a lodger in on a formal 6 month Assured Shorthold Tenancy agreement and obtain consent from the freeholder, is there any reason why this wouldn't be permitted under the terms of the Help to Buy Equity Loan?

Could I also make use of the Rent a Room tax scheme? I see that it would have to be let on a furnished basis, which is how I intend to let the room out in any event.

All of this is very new to me, so any advice is much appreciated.

Thanks

Why would you grant the lodger a full blown tenancy with an AST instead of a licence to occupy as you would with an excluded occupier?

As to whether the freeholder or the mortgage lender would have an issue with you having a lodger you would need to check both the lease and the T&C of your mortgage. It's unlikely either would prevent you having an excluded occupier but you would really need to check your paperwork just in case.

it02s28 · 15 October 2019 at 10:10PM

Hi LoL,

Thanks for your reply.

You're quite right, it wouldn't be an AST it would just be a Licence to Occupy that I would want to use to document the letting. I have just reviewed the underletting provisions of the long leasehold agreement and it appears there's a restriction on sub-letting of part...

I've just fired off an email to the sales rep (works for the developer, also the freeholder) to clarify and see if they'd be amenable to relaxing this clause. I will update this post accordingly upon receipt of a reply.

hazyjo · 15 October 2019 at 11:53PM

Six months? :eek: Check G_M's sticky re lodgers. I'd want no more than one month at most. Probably actually a weekly or fortnightly term/notice by either side.