Rental cover decides it, not the headline rate.
One property or a portfolio, personal name or limited company. Lenders differ enormously in how they stress-test the rent, and for most landlords that is what decides who will lend at all rather than who is cheapest.
What lenders actually assess
Buy-to-let is underwritten on the property as much as on you. These are the three things that decide the answer.
- Typical deposit
- 25% of the property value, sometimes more
- The key test
- Rental cover, often called ICR
- Ownership
- Personal name or a limited company
- Portfolio rules
- Tighter once you hold four or more
Rental cover
Lenders test the rent against the mortgage payment at a stressed rate. Fall short and they decline, however good your income is. The stress rate varies hugely between lenders.
Personal name or company
Many landlords now buy through a limited company. It changes the lenders available, the rates and the fees. It also has tax consequences, which are a question for your accountant.
Your wider portfolio
Once you hold four or more mortgaged buy-to-lets you are a portfolio landlord. Lenders then look at the whole portfolio, not just the one you are buying.
How we place a buy-to-let
Work out the achievable rent
Not the optimistic figure. Lenders use a surveyor's assessment, so we start from something realistic.
Test it against the lenders' calculations
The same rent passes comfortably with one lender and fails with another. This is where the case is won.
Settle personal versus company
Alongside your accountant. We will tell you what each route does to the lending; they will tell you what it does to your tax.
Apply and manage the valuation
The valuer confirms both the value and the rent. We deal with it if either comes back lower than expected.
Buy-To-Let, answered
- How much deposit do I need? Usually at least 25%, though some lenders want more, particularly for flats above shops, houses in multiple occupation or new-build.
- What is ICR? Interest cover ratio. The lender takes the expected rent and checks it covers the mortgage interest by a set margin at a stressed rate, commonly 125% to 145% depending on your tax position and the lender.
- Should I buy through a limited company? That is a tax question and it depends on your income, your plans and how many properties you hold. Speak to your accountant. Once you have decided, we will find the lending to match.
- Can I let to family? That is usually a regulated buy-to-let, which is a different and much smaller market. Tell us up front, because it changes everything.
- Do I need to own my own home first? Many lenders require it, but not all. First-time landlords who are not homeowners have fewer options rather than none.
A typical rental cover requirement. Whether your rent clears it depends entirely on which lender is doing the sum.
We run the figures across the market before you offer, so you know what will actually lend rather than what looks cheapest online.
Request assistancePeople asking about this usually ask about these
Ask us about buy-to-let
Tell us where you are up to and an adviser will come back to you. The answers below just save us a phone call working it out.
- One of the five advisers on Eastfield Road, not a call centre.
- Usually the same working day.
- No obligation, and nothing to sign at the end of it.
Would rather talk now? Call 01733 602 033.
Got a property in mind?
Send us the price and the expected rent and we will tell you quickly whether it works.