BTL mortgage question

araminta

I have been looking into BTL mortgages and have an question regarding the 125% rent required and LTVs.

You can get BTL mortgages up to around 75% LTV however I cannot see how the rent required for a mortgage of this LTV is achievable once you apply the 125% of mortgage payment required at the stress test percentage interest rate ie 6%.

Is it a case that figures for BTL's only add up with a bigger deposit ie 40-50% or do lenders consider your overall income/affordability if the rent needed at 125% of mortgage payment on the stress tested interest rate is more than would be achievable?

Thanks

kingstreet

125% of the mortgage interest payment, not capital & interest?

araminta

Hi

Yes I was looking at interest only but the 125% calculation still seemed quite high in terms of achievable rent, more deposit saving is needed I think.

kingstreet

The formula is a way of pointing out to you that the yield isn't really good enough for the property to be considered a good income producing asset.

somethingcorporate

kingstreet wrote: »

125% of the mortgage interest payment, not capital & interest?

Is that lender specific?

From my conversations with Nationwide their 125% was for both capital and interest.

It may have been an error by the agent.

araminta

Yes that makes sense, I am looking into options of securing a house I would like to purchase for future development and to become the family home. I was exploring the option of purchasing it as a BTL and letting it for 2 years while I save the cash for the extension etc and so we could have the work done once tenants moved out/before we moved in but the figures are a stretch at 125% rent required as I only have a 25% deposit, never mind, it was worth an explore.

Thankyou

nubbins

Hi,

I have just done something similar recently and my broker used the Clydesdale as they use a low interest rate (I think it was 4%ish, might be wrong) in their 125% calculations, in fact i'm sure he said they are one of the only ones doing left using such a low rate.
I am not sure where you are living but I would be suprised if a 25% deposit plus a low rate 125% did not cover your rental?

araminta

Thats good to know thanks, I have some historical adverse credit so don't have full range of lenders available to me but will put it to a broker and see what could be done.

Thanks

kingstreet

somethingcorporate wrote: »

Is that lender specific?

From my conversations with Nationwide their 125% was for both capital and interest.

It may have been an error by the agent.

Nationwide doesn't offer BTL products?

kingstreet

So this is a BTL for someone with an adverse credit history who doesn't already own their own home?

Mortgage_Mark_2

I suspect they're just lumping TMW/Nationwide in together.

In my experience Clydesdale Bank are one of the worst for BTL affordability too as they will look to ensure that it's affordable in a similar way to a residential mortgage, which can cause problems.