Buy to Let Lending Guide

Buy to Let Lending Guide

Please see below for our Buy to Let Lending Guide - if you have any questions please get in touch with one of the team and we will endeavour to help you.

Loan Types

Consumer BTL’s.
Investment BTL’s.
Regulated BTL’s.
Non Homeowner BTL’s.
Let to Buy.

Minimum Loan

£25,000.

Maximum Loan

£1,000,000.

Minimum/Maximum Term

5 years – 40 years.

Repayment Basis

Repayment.

Interest Only.

Minimum Property Value

£75,000.

Loan to Value

Purchase/Remortgage – 75%.

Capital Raising – 75% max £500,000 (debt consolidations limited to 30% of property value).

Deposit

Personal savings.

Non repayable gift from immediate family member.

Sale/remortgage of existing property.

Unacceptable Lending

  • Limited companies.
  • Sale and rent back.
  • DWP tenants.
  • HMO’s.
  • Properties being purchased from the applicant’s own business.
  • Properties that require items of major essential repair i.e:  Structural defects, Electrics, Drains. Trees.
  • Applications which have previously been declined by other lenders (other than due to credit score or issues with the previous property).
  • Remortgage applications where the applicant has not owned the property for six months.
  • Capital raising for business or investment purposes or to fund living costs.
  • Bridging finance.
  • Applicants who have taken out a pay day loan within the last three years. 
  • Self-build.
  • Foreign Currency Loans.
  • Properties with EPC rating of F and G.

Minimum Age

21.

Maximum Age

No maximum age.  Each case is assessed on its own merits.

Number of Applicants

Max 4 – we will consider the two highest incomes only.

Residency

UK or EU Citizens.

Non UK or Non EU citizens must have been residing in the UK for the last 2 years and have non-conditional and permanent right to reside.

Expatriates are not acceptable.

Maximum Portfolio

The maximum number of BTL properties that can be in mortgage to the Society is 4 and the maximum number of BTL properties held in a portfolio, regardless of whether they are in mortgage to the society, other lenders or mortgage free is 15.

Credit History

CCJ’s/Defaults with an aggregate total of £500 or less, registered over 3 years ago and satisfied for at least 6 months can be considered.

Bankruptcy – discharged more than 6 years ago and no adverse credit within last 3 years.

IVAs/Trust Deed – Registered over 6 years ago, must have been completed over 3 years ago, no adverse credit within last 3 years and satisfactory explanation.

Repossession/voluntary surrender of property - not acceptable.

One missed payment on no more than one communication supplier, credit card, mail order or utility bill for no more than one month, can be considered providing the account has been brought up to date and a satisfactory explanation is provided.

No more than one over limit position on credit cards or current accounts during the last 12 months, which should have now been rectified.

Pay Day Loans

Applicants who have taken out a pay day loan within the last three years are not acceptable.

Minimum Income

£20,000 minimum combined income for non-portfolio land BTL.

For portfolio landlord BTL applicant must have non-BTL income surplus of at least £100 using existing residential mortgage affordability calculator.

Rental Calculation

Purchases and remortgages with additional borrowing - rental income must be at least 140% of the mortgage interest, calculated at the rate of 5.5%.

Remortgages with no additional borrowing - rental income must be at 125% of the mortgage interest calculated at the rate of 5.5%. 

Employment

Applicants must be in permanent full or part time employment and continuously employed for the last 6 months.

Applicants must not be under notice of termination of employment or notice of redundancy.

Retirement Income

Must be in receipt of pension income to meet the minimum income requirement.

Short-term / Fixed-Term Contracts

Fixed-term contracts are acceptable where the applicant is currently on a 12 month contract and has at least 6 months remaining or evidence of a new / renewed 12 month contract must be provided, preferably in the same line of work.

Self Employment

Minimum trading period is 2 years. 

An average income over the last two years will be assessed or the latest income will be applied if lower.  Income is defined as:

  • Sole Traders and Partners -  applicant’s share of the net profit.
  • Directors of limited companies (25% or greater shareholding)  - applicant’s salary/ remuneration and dividends.

Maternity/Paternity Leave

Where an applicant is currently on or going on maternity/paternity leave, confirmation is required from the applicant of her/his intention to return to work on a full-time/part-time basis. 

Acceptable Income

Income taken at 100%

  • Basic annual income.
  • Regular dividends.
  • Occupational pension, private and state pension.
  • Car Allowance.
  • Large Town Allowance.
  • Housing allowances (police officers).
  • Placement Income received by Foster Carers.
  • Teachers Learning Responsibilities (TLR).
  • Guaranteed Overtime.
  • Guaranteed Bonuses.
  • Guaranteed Shift Allowances.

Income taken at 50%

  • Overtime, Shift Allowances, Bonuses.
  • Commission.
  • Rental income (unencumbered /mortgage free property).
  • Maintenance confirmed by Court Order or 6 months track record.
  • Secondary income (continuous 12 months).
  • Working Family Tax Credit.
  • Income from Trust Funds / Dividends / Investments – Evidence will be required via an Accountant or 2 years HMRC Tax Calculations & Tax Overviews.

Location

England (Including Isle of Wight) & Wales.

Minimum Property Value

£75,000.

Acceptable Security

Residential properties permanently affixed to land, which are not mentioned in the unacceptable security section below, are suitable security for mortgage lending subject to confirmation by the Society’s valuer.

Unacceptable Security

  • Non-standard construction.  This also includes. Laing Easiform / Wimpey No Fines or similar construction types.
  • System built properties registered under the Housing Defects Act 1984.
  • Flying freeholds over 15%.
  • Properties with residential restrictions.
  • Properties without a kitchen, wc and bathroom.
  • Properties with agricultural restrictions, farms and small holdings.
  • Properties with more than 5 acres of land.
  • Live / Work Units.
  • Houses of Multiple Occupancy (HMO).           
  • Properties adjacent to or above retail outlets including: Fast Food /Take Aways, Wine Bar / Bistro, Public Houses, Off Licence, Betting Shops, Dry Cleaners, Petrol Stations.
  • Shared Ownerships properties unless under the Help to Buy Scheme.
  • Freehold Flats or Maisonettes.
  • Ex-Local Authority / Housing Association flats or Maisonettes.
  • Flats in blocks with shared walkway access.
  • Leasehold properties with less than 75 years remaining on the lease at the end of the mortgage term.
  • Properties which have internal door locks.
  • Properties which are owned by the current owner or current vendor for less than 6 months. 
  • Properties which are not ready for immediate occupation.
  • Properties which are affected by progressive structural movement, dry rot, Japanese Knot Weed or contaminated land.
  • Properties listed as defective under the 1984 & 1985 Housing Acts unless rebuilt to NHBC Standards and with appropriate guarantees.
  • Properties in which High Alumina Cement has been used in the construction.
  • Prefabricated buildings and unrepaired PRC constructions.
  • Properties with an anticipated life span of less than 25 years beyond the end of the mortgage.
  • Flats in blocks of more than 6 storeys, basements/underground parking count as 1 storey.
  • Steel framed structures build prior to 2000.
  • Properties with EPC ratings of F and G.

 

Residential Status

Non homeowners/First Time Buyers - Where applicants do not own their own residential property a full affordability and stress testing will be required for each applicant.  This also applies in the case of joint applications where one of the applicants is a non homeowner, using the sole income of the non home owner to calculate their individual affordability. 

Minimum Income

£20,000 minimum combined income.

Affordability

An income and expenditure statement is completed by all non homeowner applicants based on their net acceptable income and their anticipated expenditure as if they were to occupy the property as their main residence.  Our Affordability Assessment must result in a surplus net disposable income being evident.

Regulated BTL

Where the tenants are family members the loan will be processed as a Regulated Buy to Let which will require full affordability assessment and stress testing in addition to our BTL rental income calculation.  The rental calculation will be based upon the rental figure as confirmed by the valuer rather than the actual rent being paid by the family member.

Affordability

An income and expenditure statement is completed by all applicants based on their net acceptable income and their actual expenditure.  This will include payments to their own residential mortgage (if applicable) and also payment to the new mortgage.  Our Affordability Assessment must result in a surplus net disposable income being evident.

Let to Buy            

Where the purchase of a new residential property will be simultaneous, normal buy to let criteria apply.

Where applicants are looking to convert an existing residential property to a BTL, but will not be homeowners on completion, the Non-Homeowner criteria will apply in addition to the normal buy to let criteria.

 

 

Maximum Portfolio Size

15, properties in mortgage to the Society is 4 (plus 1 residential loan).

Minimum Loan

£25,000.

Maximum Loan

£1,000,000.

Maximum exposure to a borrower or a related counterparty is restricted to £1,500,000.

Rental Calculation

Rental income on the subject property must be at least 140% of the mortgage interest, calculated at the rate of 5.5%.

Rental income on remaining properties within the portfolio must have a combined coverage of at least 140% of the mortgage interest, calculated at the rate of 5.5%.

Affordability

An income and expenditure statement must be completed by all applicants based on their net acceptable income and their actual/proposed expenditure.  Our Affordability Assessment must result in a surplus net disposable income of at least £100 exluding BTL income and expenditure.

Acceptable Security

Residential properties permanently affixed to land, which are not mentioned in the unacceptable security section below, are suitable security for mortgage lending subject to confirmation by the Society’s valuer.

Unacceptable Security

  • New build flats excluded (built in last two years).
  • Non-standard construction.  This also includes. Laing Easiform / Wimpey No Fines or similar construction types.
  • System built properties registered under the Housing Defects Act 1984.
  • Flying freeholds over 15%.
  • Properties with residential restrictions.
  • Properties without a kitchen, wc and bathroom.
  • Properties with agricultural restrictions, farms and small holdings.
  • Properties with more than 5 acres of land.
  • Live / Work Units.
  • Houses of Multiple Occupancy (HMO).         
  • Properties adjacent to or above retail outlets including: Fast Food /Take Aways, Wine Bar / Bistro, Public Houses, Off Licence, Betting Shops, Dry Cleaners, Petrol Stations.
  • Shared Ownerships properties unless under the Help to Buy Scheme.
  • Freehold Flats or Maisonettes.
  • Ex-Local Authority / Housing Association flats or Maisonettes.
  • Flats in blocks with shared walkway access.
  • Properties which are owned by the current owner or current vendor for less than 6 months. 
  • Properties which are not ready for immediate occupation.
  • Properties which are affected by progressive structural movement, dry rot, Japanese Knot Weed or contaminated land.
  • Properties listed as defective under the 1984 & 1985 Housing Acts unless rebuilt to NHBC Standards and with appropriate guarantees.
  • Properties in which High Alumina Cement has been used in the construction.
  • Prefabricated buildings and unrepaired PRC constructions.
  • Properties with an anticipated life span of less than 25 years beyond the end of the mortgage.
  • Flats in blocks of more than 6 storeys, basements/underground parking count as 1 storey.
  • Steel framed structures built prior to 2000.
  • Properties with EPC ratings of F and G.

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