Renting out a room could cut over 2 years off your offset mortgage
By using monthly rent to make mortgage overpayments the typical homeowner could save over £1,028 in interest in just 5 years, and pay off their mortgage 29 months earlier.
first direct's offset mortgage allows unlimited overpayments. So the bank calculated that by making monthly overpayments of £354 for 5 years on the their market leading 65% LTV 3 year fixed rate offset mortgage, currently 3.49% with a £499 booking fee, homeowners would save £1,028 in interest payments and shave 29 months off their mortgage.
Should you consider an offset mortgage?
If you don't already have an offset mortgage, remember that they are only really suitable for those with a large savings pot - as you offset your savings against your mortgage borrowing, only paying interest on the difference.
Would renting a room help with any other type of mortgage repayments?
If you have a mortgage which does not penalise you for overpayments then it could. The extra money from your rent can be put towards a bigger mortgage repayment one month, or help cushion a more meagre month further down the line.
Effectively you could still use it to repay your mortgage more quickly. Be sure to check what your providers rules and limits are for overpaying though.