Mortgage Matters - Why has Buy to Let (BTL) investing become harder ?
Here we look at whats change for Buy To Let Investors when it comes to mortgages!
Why has Buy to Let (BTL) investing become harder ?
Generally BTL purchasers want a 75% LTV mortgage, or if remortgaging to release funds 25% will need to remain in the property. Based on the monthly rent, lenders use a 'stress rate' to calculate the borrowing amount they can offer. On top of this they use what's called an ICR (Interest Cover Ratio) which further increases the rent required.
When rates were low lenders were using a stress rate of 5% or less; now they're using 6% or more. The ICR hasn't changed at 145% for higher rate taxpayers or 125% for basic and Ltd Co. Due to higher property prices in London and the South East (and some other hot spots in the UK) it has never been easy to achieve 75% even when rates were low, but now rent needs to be at least 20% higher since mortgage rates and the stress rate have risen. Alternatively you'll need a much larger deposit
Some lenders can consider using an applicants earned income to 'top-up' the calculation - known as 'top-slicing' but this requires a deep dive into both income and all other financial commitments too. The outcome at the moment is that investors generally need a lot more cash - but with the help of a good broker with in depth knowledge of lenders criteria, their BTL objectives may still be possible.
What to do next if your looking to buy an investment property?
You can request a free consultation with one of our independant mortgage brokers HERE if you would like to understand more about what options are availble to you in a friendly no obligation way and to give you peace of mind your rental properties are working as effeciently as possible for you.
