We’ve introduced changes to our buy-to-let proposition to comply with the PRA requirements for assessing buy-to-let mortgage applications and to enhance our broker service.
One of the key aspects of our buy-to-let offering is that will continue to accept applications from portfolio landlords. Here’s a summary of the changes:
- New and improved buy-to-let calculator hosted on our website making it easier for brokers to assess customers’ affordability.
- To ensure customers can afford all existing mortgage commitments additional information requested on their other properties (residential and buy-to-let) to enable a full affordability assessment.
- For portfolio landlords (those owning four or more properties), additional information about their existing buy-to-let and rented properties, their landlord experience, use of letting agents and future portfolio plans
- Revised Interest Coverage Ratio (ICR) calculation of 5.5% x 135%, reduced from 5.5% x 145%. We will continue to top-slice if there is a rental shortfall, taking into account any free personal income the applicant may have. In all cases, expected rent must continue to meet a minimum rental cover calculation of 5.5% x 125%.
- Redefined the maximum number of properties an applicant can own from ‘mortgaged’ to ‘rented’ but the maximum number remains at 4.
- New valuation service to assess rental demand and rental income for all other properties being let, with the results used to validate customer affordability.
We also plan to introduce several other enhancements to our buy-to-let proposition:
- Increasing the total number of rented properties a landlord customer can own from 4 to 10. The total will include unencumbered properties and properties mortgaged with another lender.
- Increasing the maximum aggregate customer borrowing allowed from £2m to £3.5m.
- The current £50,000 minimum income for aggregated borrowing over £1m will be removed. All customers will be required to meet our standard buy-to-let minimum income of £25,000.
Here’s some information to help update you on our approach to buy-to-let:
Definition of a portfolio landlord
We define a portfolio landlord as a customer who has four or more properties owned solely, jointly or in aggregate across all applicants that meet the following criteria:
- Rented properties, whether mortgaged or unencumbered
- Residential properties with either consent-to-let or permission-to-let agreements from the current lender
- Properties must be in the UK (England, Scotland, Wales or Northern Ireland)
- Excludes properties held in a limited company
Accounting for properties rented out as holiday lets
Holiday let properties should not be included in a customer’s total number of rented properties. Their monthly mortgage payment(s) must be included as a commitment in the calculator but the rental income cannot be included as this will vary from month to month. As part of a customer’s main income, rental income can be included if it can be evidenced through their tax return or business accounts in line with our policy.
Existing properties do not need to meet our minimum Interest Cover ratio (ICR)
Our buy-to-let calculator will only check that NEW properties meet our minimum ICR of 135% (125% from rental income). A customer’s existing rented properties will NOT be assessed individually against our ICR criteria. These will be assessed as part of a customer’s personal affordability. To ensure an accurate assessment, you’ll need to ensure you input the correct gross monthly rental income into the buy-to-let calculator and application for each property.
As a responsible lender, we have been able to make these changes whilst ensuring that we maintain our risk appetite and the quality of business we accept.
Please visit our A-Z of lending criteria on our web site for more details, contact your BDM or use LiveTALK our broker instant messaging service.
