Deciding to rent out an extra bedroom in your home is not a decision to be taken lightly. While it can provide financial benefits, it also comes with its own set of challenges. Here's a look at the pros and cons of renting your extra bedroom, to help you make an informed decision.
The pros
One of the most compelling reasons to rent your spare room is the additional income it can generate. This can help with mortgage repayments and contribute towards other house expenses – like council rates and maintenance costs. If you’re looking at paying off your mortgage faster, renting your extra bedroom for a while could make it easier to increase your payments.
Inclusive of utilities in your rental agreement, the costs associated with running a home can be effectively split. This cost-sharing extends to expenses like electricity, water, Internet and potentially even groceries. As you’re sharing the load with someone else, your financial burden can be lightened.
- Companionship and security
For those who live alone, having another person sharing your home space implies there’s always someone around. This can be particularly reassuring when you’re away and don’t want your home to be vacant for long periods. Plus, a tenant can also help share some household chores, reducing the workload.
The cons
One of the main trade-offs when renting out part of your home is a degree of lost privacy. Unless you have a separate, independent space to rent, having a tenant live under the same roof usually means you'll need to navigate shared living spaces and adjust to another person's lifestyle and habits. This might mean accommodating different routines, noise levels, and personal preferences.
As you consider renting out your spare bedroom, remember that this new income stream could have tax implications. It’s advisable to consult with a tax professional to understand whether and how tax would apply to your situation, when deciding if this is the right option for you.
With the landlord tag comes a range of responsibilities. As a landlord, you're required to maintain the property and fix any problems that may arise in the rented area. This could add an extra layer of stress to your life, as managing these issues can be time-consuming and challenging. If you choose to go down this route, make sure you check the potential legal implications.
While the extra income from renting your spare room can boost your finances, there could be also financial risks. For instance, your tenant might fail to pay their rent on time or at all, or they might accidentally cause damage to your property that exceeds the value of their bond. And there could be costs involved in preparing the room for rent, ongoing maintenance, and potential repairs.
The bottom line?
When it comes to the decision to rent your extra bedroom, make sure you factor the financial benefits but also your personal comfort, privacy preferences, and readiness to shoulder landlord responsibilities.
Remember, you can use the extra income to help with the mortgage and even accelerate your journey to mortgage-free life. However, before making extra repayments, check whether you will incur an early repayment fee which could affect whether making additional payments makes financial sense while you are on a fixed rate. Generally speaking, you can pay extra as much as you like on a floating rate, but usually only up to a certain limit (which varies across lenders) on a fixed-term mortgage rate before early repayment penalties might apply. Get in touch if we can help you in any way.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
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