Important changes to buy to let mortgages
New regulations have been introduced which will impact the way in which lenders stress test buy to let mortgages.
Currently when a lender is stress testing how much they will lend you, for a buy to let mortgage, they allow for a rental cover requirement of 125%. However this is rising to 145%.
Below is an example of how much you can currently borrow with a rental cover requirement of 125%.
Rental cover requirement: 125% Monthly rental income: £1,000 Maximum borrowing: £174,545
Here we show the different in the maximum borrowing amount once the rental cover requirement is raised to 145%.
Rental cover requirement: 145% Monthly rental income: £1,000 Maximum borrowing: £150,470
No exact date has been given for the change in stress testing however it has been revealed that it will come into effect in the next 4-6 weeks.
If you are planning to purchase a buy to let property or your buy to let property is due for remortgage then we recommend that that you speak to an independent financial adviser to discuss your options. They will be able to apply for a decision in principal before the stress test changes come into effect.
Please do not hesitate to contact us if you would like to discuss the impact of these changes:
Tel: 01727 85 22 99
Email: mortgages@kdw.co.uk