How do they assess affordability for Buy to Let properties?
An interest coverage ratio (ICR) and a stressed interest rate are used to calculate affordability for Buy to Let mortgages. Rental income must be at least 140% of the interest payable on a stress rate of:
- 5.0% for like for like remortgages
- 5.5% for purchases and capital raising remortgages
What about additional income?
Whilst the properties are expected to be self-financing, the presence of an additional income provides a contingency in the event of ‘void’ periods.
It’s important to remember that whilst there is no minimum income, evidence of income is still required and affordability will be assessed. The primary applicant must be able to demonstrate a primary income (earned or savings generated), evidenced through latest monthly bank statement and latest monthly proof of income (latest year self-employed).
Please note, as with all mortgage affordability assessments, the underwriter will consider overall indebtedness vs. income.