Make your home work harder through the property crisis

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Written by Mark Burton
Know Your Money editor

With reports of rising repossessions continuing to emerge, many Britons may be rightfully concerned about making sure they keep hold of the keys to their home throughout this period of economic crisis.

And with house prices still at acutely depressed levels, homeowners who are struggling with mortgage payments may be reluctant to consider downsizing to ease the strain. In such circumstances, it may be wise to look at ways to generate an income from a property such as offering a spare room to a lodger.

Recession and the lodging revolution

According to the latest figures from Abbey, thousands of households are waking up to the financial benefits of renting out a room, with the number of lodgers estimated to have nearly tripled in the last 14 months.

Earlier this month, the bank reported that while there 338,000 lodgers in the UK in June 2008, there are now around 981,000 living in spare rooms around the country.

The group added that the financial benefits of doing so could prove invaluable to Britons who are worried about keeping up with mortgage payments, as each household earns an average of £393 per calendar month by renting out a spare room. In total, this equates to an additional £4,716 each year.

Nici Audhlam-Gardiner, director of Alliance & Leicester Mortgages, urged the 16 million homeowners in the UK with a spare room to consider renting it out instead of leaving it unoccupied during this period of economic difficulty.

"Not only will you have some extra money each month but most of it could be tax-free too. Those homeowners who still have spare rooms to rent are collectively missing out on over £6 billion a year," she explained.

However, she also added that for those who would rather avoid calling someone else into contribute to repayments, shopping around for a market-leading tracker mortgage such as those offered by Alliance & Leicester could also be an effective way to allay the emotional and financial burden of making mortgage payments.

Giving up the parking space

For Brits who own a garage or driveway, renting the space out could also be an effective and unintrusive way of boosting monthly earnings, while those living nearby to upcoming sports or entertainment venues may be able to give their finances a quick shot in the arm by renting the space out to spectators.

Ahead of the start of Wimbledon, insurance group esure pointed out that garage and driveway rental is one of the easiest ways to use a property to make money on such events, particularly in the capital where parking charges are high and spaces are severely limited.

However, the group clarified: "It's important to make sure that you call your insurer before turning your property into a car park. Renting out an integral garage could invalidate your home insurance or your home insurer may add restrictions to your policy throughout the rental period."

Meanwhile, many residents in Scotland have realised the benefits of carrying out a house swap or a short-term rental this month as the Edinburgh Fringe Festival draws to a conclusion.

Many households in the Scottish capital rent out their properties during the summer comedy fair, often achieving a very favourable income as tourists flock to the city from the rest of the UK and overseas.

However, those planning a house-swap or a temporary rental are reminded that it is vital to discuss the arrangement with their insurer to establish what the limits on cover and liability are.

Esure reminded homeowners that there are often restrictions on cover such as limited theft cover or heightened security requirements which need to be in place for potential claims to be valid.

Mike Pickard, head of risk and underwriting at the group, advised: "Don't let an ace business idea turn into a disaster. Making sure your home is adequately covered and that your property is properly secured should be your number one priority before letting any paying guests use your home and its facilities."

Important Notice
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