The society gave the example of a single, childless applicant earning £26,000 who wants to buy a two bedroom property for £200,000. With a 20% deposit, they would require a £160,000 loan.
By letting the spare bedroom out at £400 a month, the rent would cover £58,500 of the loan, allowing the buyer to instead borrow £101,500 over 25 years. Up to 50% of the loan amount can be covered by the rental income.
The mortgages are available at the same rates and terms as the society’s standard residential mortgages and its 95% parent assisted mortgages, starting at 2.99% for a three-year variable. The maximum loan-to-values offered are up to 85%, or up to 95% with collateral.
Dick Jenkins, chief executive of Bath Building Society, said: “Increasingly people are starting to realise that rent is more expensive than having a mortgage in the current climate.
Many young people are happy with sharing their home with a friend and here we have created an opportunity to use the rent of a friend sharing the property to contribute to the affordability of the mortgage. Better still, some can use this arrangement to qualify for tax relief from the government,” he said.