Renting affordability - wages plus interest from savings?

Sapindus

I am planning on renting a house once I've sold mine, while I look for a new one.  Will the letting agent judge what rent I can afford based purely on my salary or will they take into account the fact that I will have money earning interest in the bank from selling my house, which will add to the amount I have available each month to spend on rent?  Or will this vary on a case by case basis from each letting agent or landlord?

youth_leader

I had a lot of savings when I applied for a rental, but the agency use a formula of something like 30 x rental costs  using your 'annual' income.  I failed it, unfortunately, the couple that rudely interrupted my viewing got the contract! 

Just found a site that mentions it - Rent Affordability Calculator (smartmoneytools.co.uk)

PRAISETHESUN

Ultimately it comes down to what the LL will accept, which is usually on the advice of their agent which they pay to manage their property. Some agents can be fairly flexible in what they will accept, others not so much. IMO if you're able to document your savings income (through interest statements from the bank, self-assessment tax returns, etc) then I don't really see why they shouldn't consider it? Although there's no guarantee that you won't just spend all the cash and therefore won't be earning any interest, which might make you seem riskier.

Another option might just be to pay some of the rent in advance if the LL/agent will accept that? That's what I ended up doing when I first moved to the UK and had difficulties passing rental referencing/affordability checks at my first property.

RHemmings

I do know someone who was rented a flat, by a major letting agent chain, solely based on their savings. Not income, just savings. They didn't have to pay a year (or so) ahead either. 

thegreenone

A recently retired friend offered a year's rent upfront, which was accepted by the landlord.

Sapindus

I'd be quite happy to pay six months up front and should have just enough to do that even before the cheque from the house sale comes through.

And before anyone says "you won't find a six-month rental" at least one of the lettings agents I'm looking at says all their tenancies start out with six months.

It sounds like there might be flexibility, and it's only like I'm looking at rents that are 31 or 32% instead of the usual 30% of my gross pay, so I'd need to make up a shortfall with the interest from the savings.

saajan_12

Sapindus said:

I'd be quite happy to pay six months up front and should have just enough to do that even before the cheque from the house sale comes through.

And before anyone says "you won't find a six-month rental" at least one of the lettings agents I'm looking at says all their tenancies start out with six months.

It sounds like there might be flexibility, and it's only like I'm looking at rents that are 31 or 32% instead of the usual 30% of my gross pay, so I'd need to make up a shortfall with the interest from the savings.

At those small differences it depends on the LL / LA.. are they using a reference checking service that has a strict threshold and works on a "computer says no" basis or is a human looking at all the factors and making a decision. Really the 30% rule of thumb is an approximate level where someone could afford it relatively comfortably, its not a magic green light. Personally I look closer at anyone in the 25-35% range, considering their past payment history, landlord reference, ccjs, etc. I'd rather have someone who just misses the 30% threshold with everything else great, than someone who just passes it but has multiple other warning signs. 

The usual other alternatives of payment upfront and guarantor are also there. 

Myci85

It really depends on landlord and agent and service provided. Some agents use reference agencies that need tenants to meet the strict income criteria to be able to offer the landlord rent guarantee. It is up to the landlord then if they are happy to go without this, but in my area, there are fewer available rentals than in demand, so landlords can afford to be picky. In which case offering to pay 6 months in advance would seem the easiest option, as then no need for rent guarantee. 

theartfullodger

LL (I am one) can accept whatever they wish as a test of affordability. 

My best ever tenants has no UK financial history but a neighbour of mine said "Mr Artful, they very nice people" - and they were... 

A sensible logical landlord would look at your numbers and accept them.  Sadly there is no requirement for a landlord to be sensible or logical: Indeed there is enough evidence on this site and others similar that too many don't even have 1/2 a brain.

Best wishes to all

Murphybear

theartfullodger said:

LL (I am one) can accept whatever they wish as a test of affordability. 

My best ever tenants has no UK financial history but a neighbour of mine said "Mr Artful, they very nice people" - and they were... 

A sensible logical landlord would look at your numbers and accept them.  Sadly there is no requirement for a landlord to be sensible or logical: Indeed there is enough evidence on this site and others similar that too many don't even have 1/2 a brain.

Best wishes to all

Your comments often make me smile

I was a letting agent for years and we only had 6 months contracts.  

Mr.Generous

As stated landlords can pick and choose. As a landlord I want tenants who I think will stay 2 years+, because every tenant switch costs including tenant finding fee of approx a months rent, hassle changing utilities and council tax to my name, and the rent lost during a void.

Although you sound completely honest and want to be that way just be careful what you say to any agent/landlord about the time you expect to rent for. I'm being completely honest, It'd be a no from me. last property saw 10 prospective tenants and 8 wanted it - from 50 something applicants. The one before that the agent pulled it from RightMove with 100+ applicants.

Rather than just telling you what you want to hear - because like others have said you get a report on the financials and it will say can/cannot afford the rent - but if just below the threshold it will be an amber not red warning so landlord can pick - the financial checks are only run IF the landlord or agent picks you. Getting sellected might be the issue if you admit to a short stay for many landlords.