Completing a buy-to-let application form on our web site and the MTE – changes visible from Thursday 7 September
Additional information required
From Thursday 7 September we will be making changes to the application forms you use on our web site and the MTE. A number of new mandatory questions will be included requesting additional information and MUST be completed to progress the application. However, until we launch our new buy-to-let calculator, this information will not be taken into account when assessing an application. The application will be assessed and underwritten using our existing eligibility and affordability criteria.
The additional information required is:
- For all applicants, you will need to individually provide details of each property a customer owns.
- For portfolio landlords (those owning four or more properties), their existing buy-to-let and rented properties, their landlord experience, use of letting agents and future portfolio plans.
Submitting an application
Until further changes to our lending criteria come into effect in Q4, all buy-to-let applications that are submitted and not immediately declined will receive an automatic REFER decision. This does not mean that an application is likely to be declined. It purely means that, until our systems are updated, we will not be able to provide an immediate confirmed online ACCEPT decision before our underwriters have assessed it. However, by using the online buy-to-let calculator you will get a good idea whether or not an application will be accepted. You should continue to submit applications as you do today.
Portfolio landlords and maximum number of properties
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
New maximum of 10 rented properties owned from Q4
In Q4, we will introduce a new maximum of 10 rented properties (mortgaged or not) per landlord. Until then, the maximum will be 4.
Portfolio landlord applications – provision of additional information
We will request additional information for applications from portfolio landlords.
- Landlord experience – there will be a set question on the application where you will need to select the number of years the customer has been a landlord
- Use of letting agents – there will be a set question on the application where you will need to select YES or NO
- Future portfolio plans – there will be free text fields for you to entre relevant details
Use of income from properties outside the UK when assessing affordability
When assessing a customer’s affordability, income from foreign properties CANNOT be included in their total number of rented properties and must NOT be entered into the buy-to-let calculator.
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.
Using our new buy-to-let calculator (from Monday 25 September)
Providing full details of a customer’s existing buy-to-let and rented properties
You will need to use the buy-to-let calculator to individually provide details of each property a customer owns. The calculator will capture details of up to 10 properties but until we change our maximum properties limit in Q4, the maximum we will consider is 4 so please do not enter details of any more properties than this. You will only need to run one calculation to see if we can help.
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.
What to do for transactions where new regulatory standards do not fully apply such as a like-for-like remortgage from another lender or contract variation
The only difference for these applications is that we will not validate their rental income using our buy-to-let valuation service. Instead, we will use the gross rental income declared by a customer. Other than that, the same process should be followed as it is for all other buy-to-let applications, including providing bank statements to evidence rental income.
Accounting for multiple in-progress applications (with us or another lender) in the buy-to-let calculator and the application
Details of other in-progress applications should be inputted into the buy-to-let calculator and the application as if those properties were existing commitments. This can include the expected rental income from the new properties without this being evidenced on bank statements. Application notes need to be clear that there are multiple applications in progress, stating the property addresses that are not yet commitments and explain why the associated rental income is not visible on bank statements.
Valuations (from Monday 25 September)
Valuing a customer’s other buy-to-let properties
It is a requirement within the PRA Supervisory Statement SS13/16 that we validate rental income and demand when assessing affordability.
An independent valuer will validate the gross rental income a customer receives and rental demand in the local area within 48 hours of the request. They will use a combination of an AVM and other sources to complete this. The results will be used to validate our affordability assessment and cannot be appealed. We will not physically send a valuer to their other properties in any circumstances.
No charge for valuations on existing buy-to-let properties
Customers will not be charged for the additional valuations on their existing buy-to-let and rented properties. They will continue to pay for the valuation on the NEW property that is being mortgaged with NatWest. There is no change to our existing buy-to-let valuations policy.
Difference between actual rent received and the rental income/demand valuation
Underwriters will always use the lower figure between that provided by a customer and the result of the independent valuation.