Landlords finding it easier to get buy-to-let mortgages
Lender relaxes stress tests as fixed-rate mortgages hit cheapest-ever level
By Stephen Maunder
Changes to ‘stress testing’ and cheaper fixed-rate mortgage deals are making it easier for landlords to expand and refinance their portfolios. With tax relief cuts continuing to eat away at their profits, it’s been a tough year for landlords – and that trend could be set to continue in 2019, when the letting fees ban is set to come into force.
There are some signs, however, that things are getting better for investors in the buy-to-let mortgage market. Here, we round up several key mortgage developments for landlords and offer advice on getting a buy-to-let mortgage. For expert advice from our whole-of-market mortgage brokers, call Which? Mortgage Advisers on 0800 197 8461. Tipton & Coseley eases buy-to-let criteria
When landlords apply for a mortgage, they need to prove their rental income will be enough to meet the mortgage payments and cover additional expenses such as maintenance and void periods. With this in mind, lenders set interest cover ratios (ICRs). If a lender’s ICR is 145% – a common figure – that means the projected rental income must cover a minimum of 145% of the proposed mortgage payments. Tipton & Coseley Building Society, however, has now reduced its ICR to 125% for basic-rate taxpayers and 130% for higher-rate taxpayers. This move has potentially opened up a new lending avenue for some landlords. The building society has also reduced its minimum application age from 25 to 21.
Cammy Amaira of Tipton & Coseley says: ‘Recent cuts to tax relief have made buy-to-let investing more challenging for new and experienced landlords. ‘We hope that these favourable changes to our stress rates for experienced landlords will help landlords regain momentum.’ Some lenders already use ICR levels lower than 145% if the applicant has a big deposit, is a lower-rate taxpayer or has formed a buy-to-let company. It’s always worth seeking advice from a whole-of-market mortgage broker, who will be able to recommend the right lender for your specific circumstances.