The amount you can borrow on a Buy to Let Mortgage has become difficult to calculate, given recent regulation changes, and how your personal income will be taxed from 2017.
This Calculator is simply a guide to what you could borrow on a new Buy to Let Mortgage - each lender has a different calculation, and therefore figures will vary, but this gives you a good starting point.
Areas to consider include :
The Size of your Deposit will determine the cost of the Mortgage Deal - typically you will need a 25% Deposit, although you need to check if the Rental Income is enough to cover what you want to borrow - use the calculator below for some guidance.
Products do exist with smaller Deposits - this may be for HMO (Multiple Occupancy Properties) or properties located in certain parts of the UK. Please ask for details.
The Interest Cover Ratio (ICR) is determined by the type of landlord you are, and your Personal Tax Band..
From the Tax Year 2016-17, your gross rental income needs to be added to any other income you receive, and that will determine your highest rate of taxation. Typically a Landlord will be at least a Higher Rate Tax Payer, but get guidance from HMRC or your Accountant.
For example, if your Personal Income is £40,000 and you have £10,000 of Gross Rental Income from a Buy to Let Property, then you will be assessed as a Higher Rate Tax Payer.
For most lenders, your ICR will be :
The Mortgage Lenders will use a predetermined rate within this calculation, typically 5.5% from 2017. Whilst the product rate will be much lower given current market conditions, the lenders have to demonstrate the mortgage is affordable should rates increase to average levels.
Our calculation uses a 5.5% rate, as that would be the most common rate used.
With a larger deposit, or remortgage with no extra borrowing, we can often use a lower rate, which could allow you to borrow more than the Calculator below.
If you have 4 or more Buy to Let Mortgages, you will be classified as a Portfolio Landlord.
For our Portfolio Landlord Clients, their assessment will be a different process, as the lender will typically need :
The Buy to Let Calculator gives you a good idea on what you can borrow, however we would recommend that you contact Essex Home Finance to check your ability to get a Buy to Let Mortgage, and what you can borrow.
There are some schemes that allow the use of Surplus Personal Income to cover any shortfall in Rental Income, or will allow you to borrow more if you take a Long Term Fixed Rate (5 Years or More).
As always, please get in touch and let us look at your individual situation - we will do our best to help!
Essex Home Finance Ltd
1 High Street
01245 398466- Office Number
Essex Home Finance Ltd is an Appointed Representative of Mortgage Intelligence Ltd which is authorised and regulated by the Financial Conduct Authority under number 305330 in respect of mortgage, insurance and consumer credit mediation activities only.
Registered address: 1 High Street, Chelmsford, Essex, CM1 1BE. Registered in England & Wales under number 10607263.
Your home may be repossessed if you do not keep up repayments on your mortgage.
*From the 1st March 2018, We do not charge any Broker Fees for Residential First Time Buyers, Residential Home Movers, Residential Remortgage, and all Product Transfers (Residential or Buy to Let).
There will be a fee for all Buy to Let Purchase and Buy to Let Remortgage cases. Typically our fee will be £149, payable on Offer. We will agree any fees with you before we proceed with your case.
We always aim to provide a high quality service to our customers. However, if you encounter any problems and we are unable to resolve them you can take your complaint to an independent Ombudsman.
Our advice is covered under the Financial Ombudsman Service. You may be able to submit a claim through the EU Online Dispute Resolution Platform If you live outside the United Kingdom or if you prefer not to deal directly with the Financial Ombudsman Service.