Renting rooms to increase borrowing capacity?

As house prices and mortgage levels have increased, many first time buyer’s are seeking to add to income by renting out a room/rooms in their newly acquired houses. Most lenders will not take the potential for such income into account when assessing borrowing capacity as the purchasers need to demonstrate income and repayment capacity.

Rent a Room Scheme

If you let a room in your home then the income you receive may be exempt from tax. Revenue require that rent received must be included on your annual income tax return. Rent-a-room relief allows you earn up to €14,000 per year tax-free if you rent out a room or rooms in your home to private tenants. If you qualify for rent-a-room relief then the income you received is exempt from income tax, PRSI and the Universal Social Charge. The income you receive cannot exceed the exemption limit… if it does then Revenue will tax the total amount.

Homeowner or landlords who rent-a-room are not required to register with the (RTB) Residential Tenancies Board. The Equal Status Act is not enforced in rent-a-room agreement and this means tenants have less protection. There is no letting agreement signed and the home-owner can end the rental agreement anytime. Please refer to https://www.citizensinformation.ie/ for further information