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We Cover The Following Topics Below
Eligibility Criteria For A 75% Loan to Value Buy to Let Mortgage?
Have you previously been turned down for a 75% Buy To Let Mortgage? The criteria lenders look for when deciding what Loan to Value use are:
Anticipated Rental Income
Annual Earnings thresholds
Credit Scoring or history
Stress Testing Interest Rates
The age of the borrower
Whether they are based in the UK
If you haven't been able to secure a competitive 75% Buy To Let Mortgage, you may have not met one of the above criteria.
Your Current Tax Bracket Impacting Offers
As part of your mortgage application, landlords owning a Buy To Let property will need to disclose their current income tax bracket as part of their mortgage application. This will help the lender understand the minimum rent that needs to be achieved (otherwise known as the interest cover ratio).
Generally speaking, if you are a basic rate taxpayer, most lenders will need to see a rental income of 125% of your monthly mortgage cost. So if your interest charge is say £900 per month, then the rental income will need to be £1,125.
Higher Rate Taxpayers, the minimum generally is a 145% Uplift between their mortgage payments and rental income- so a mortgage interest payment of £900 would need a minimum of £1305 rental income.
Top Rate taxpayers have the highest interest cover ratio with a calculation of 165% of rental income., so a mortgage of £900 per month would require £1,485.
Additionally, lenders generally use a higher interest rate in stress testing at around 5.5% before applying the requisite cover ratio to see if the rental income stacks up. Many applications don't qualify for a highly leveraged Buy to Let purely because of this.
Helping Higher Tax Payers Secure a 75% Loan To Value Buy To Let Investment Mortgage
The good news is Accelerated Finance works with lenders and has access to products that work on the mortgage pay rate or use top-slicing.
Top slicing effectively means topping up your rental income with other sources of revenue streams to make sure that you can comfortably afford the interest payments.
This policy however is not applicable to later-life borrowers or landlords reaching an upper age limit (generally around 75) by the end of the mortgage term. One other point is you may need to meet the basic 125% mortgage affordability assessment.
The minimum income threshold generally could range from between £10,000- £40,000 including the rental income as a top-up. To apply online today, follow the link
The Differences Between A 2 and 5-year Fixed Term at 75% Loan To Value
A five-year fixed-term provides a good interim between the rates available on the shorter terms and more extended periods where there is less certainty about the economic conditions.
Shorter-term mortgages i.e two or three years fixed terms are available, but because of the lower period, the stress testing tends to be more rigorous. Therefore, if you are finding it difficult to secure the borrowing with a 25% deposit then it could be beneficial to opt for a longer-term.
How Income Can Affect Your Application For A Interest Only Buy To Let Mortgage
There are many different scenarios where you are unable to make a new highly leveraged investment property acquisition. For example:
Unable to meet the rental value affordability stress tests
Investing in Lower yield properties. Have a look at our recent article on the top UK Buy to Let Areas to invest in
Investing in a rental property where the current rental income is low, but there are other considerable charges including for example a high service charge.
Accelerated Finance will always take a holistic view to assess your circumstances and understand the purpose of your investment decisions - whether or not it fits into the typical stress testing framework.
Suppose you have a good credit history and decent security in place; a pay rate-based buy-to-let mortgage may be an attractive option to secure a 75% loan. You can usually borrow around 20% more in this way and achieve maximum LTVs on rental mortgage products, which wouldn't be possible otherwise.
Disclaimer
The articles are intended to provide a general understanding of the topic. The contents should not be treated as advice. Please note Accelerated Finance only considers applications for commercial or investment properties.
Your property may be repossessed if you do not keep up repayments on the finance secured against it.
