Can Boarder or Flatmate Income Help You Get a Mortgage?

Boarders, flatmates and what lenders mean

A boarder lives in your home and gets meals or other services with the room. A flatmate rents a room and shares the house. Lenders usually treat the two alike for a home loan and care about one thing: is the income reliable enough to count?

How lenders usually count it

• A discount. Lenders rarely count the full amount. They shade it, as they do with rental income, to allow for gaps between tenants.
• A cap on numbers. Most accept income from one or two boarders. Beyond that the house starts to look like a boarding business, which is a different kind of lending.
• A cap on amount. Some set a maximum per boarder per week, whatever you really charge.
• Room to spare. The property has to have the bedrooms. A two-bedroom unit with two boarders and a family won't be believed.

Some lenders won't count boarder income at all. Others count proposed boarder income on a house you haven't bought yet. That spread is why the same applicant can be declined by one lender and approved by another.

Evidence

If you already have boarders, a written agreement and bank statements showing regular payments are the usual proof. If the income is planned, some lenders accept a signed declaration of what you intend to charge, checked against what rooms rent for in the area.

Family members count too, with many lenders. An adult child or a sibling paying board is fine, as long as the payments are real and show in your account.

Should you rely on it?

Our view: use boarder income to get the loan, and plan your own budget as though the room could sit empty for a few months. Flatmates move out. If the mortgage only works with every room full all the time, the loan is too big.

It works best as a bridge. Two flatmates for the first few years while your income grows, then you take the rooms back.

A self-contained flat is different

If the property has a separate, consented minor dwelling or flat, the rent from it is treated as rental income, generally more favourably than boarder income, and it isn't limited to a couple of people. Unconsented conversions are a problem, though. Lenders and insurers may ignore the income and question the property. See granny flats and minor dwellings.

This article explains how New Zealand lenders generally assess these situations. It is general information, not personalised financial advice, and lender policy changes often — check your own position with a registered adviser. Official sources: Reserve Bank of New Zealand for lending policy and the OCR, and Sorted.org.nz for independent government-backed money guidance.