Is it Worth Getting a Flatmate to Help Pay My Mortgage?

Getting a flatmate to help pay the mortgage is a big decision. You have to share your home, and you wanted to keep the spare room for guests. But look at it this way – spare rooms are the most expensive part of the house from a ‘per use’ perspective. Sure, it’s nice to have a room where the bed is always beautifully made or where gym equipment can rust away until next new year’s resolutions. But what if your Bowflex and stationary bike were sitting on (in) a goldmine?

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No need for a spoiler alert, we all know that house prices are high and interest rates are likely to increase over the next few years. It’s a combination that has many first home owners reluctantly considering getting a flatmate to cover some of the mortgage. Let's be real, cutting back on smashed avocado and barista made coffee will only go so far. If you’re an introvert you especially may shudder at the thought of unscheduled conversations with an acquaintance in the hallway of your own home. We get it, but getting a flatmate (especially in the early years of your mortgage) pays off big time over the lifetime of your mortgage.

We’re not suggesting that you live with strangers from Trademe for the next 30 years. What we’re saying is, a handful of years of extra income to pay down your mortgage in the beginning has a huge impact on your total mortgage costs.

How much will I actually save?

Remember when your math teacher told you that you would come across math problems in the real world? We’re about to prove them right. Don’t worry, our example also gives you the answers. 

Let’s say you have a $800k mortgage. Over 30 years, the amount of interest you’re likely to pay would be around ~$651k.*

But what if at the beginning of your $800k mortgage you get a flatmate for 5 years, paying $200 a week. How much would you save if you put that extra money into your mortgage?

You’ll have saved approximately $122k in interest and reduced your mortgage by 3 years. You’d have got $52,000 in rental income but you saved around $70k more. That’s thanks to paying off more debt sooner. Debt that otherwise would have interest charged on it over and over again during the life of your mortgage.

List of massive assumptions:

  • An average mortgage rate of 4.25% p.a. over the whole life of the mortgage.
  • You don’t downgrade your property prior to 30 years
  • You can get $200 for a room in your home and there are no vacancy periods. 
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Should I get a flatmate to help pay my mortgage?

So we’ve given you the numbers. What we can’t tell you is whether or not the money is worth it. Some of us would pay good money not to have another person in our space, others would happily get three flatmates and organise compulsory wine and book club nights for their victims housemates.

If you do decide to get a flatmate, make sure you understand your tax obligations and have a bank account dedicated for any tax to be paid. If you’re not sure exactly how much will be due, overestimate it. At return time ideally use an accountant to make sure you’re doing it right.

Right, we’re off to check that everyone has completed their housework. The chore wheel is on the fridge, there’s no excuse for missing it. 

Mortgage Lab’s mission is to be the digital town square for financial decision-makers to gain knowledge about their current and future mortgage. Follow us on Facebook and LinkedIn or subscribe to our newsletter to be notified of our latest articles.

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