Buy-to-let policy
We have two types of BTL assessment, rental cover and top slicing.
Rental cover
Under a rental cover assessment, the rental income must cover the mortgage payment by a minimum ICR (Interest Cover Ratio) based on the relevant Stress Rate
This is the assessment we use for all portfolio landlords, and we use it for non-portfolio landlord cases unless top slicing could help.
ICR
| ICR | Remortgage with no additional borrowing | Purchase or remortgage with additional borrowing |
|---|---|---|
| Basic rate taxpayers | 125% | 125% |
| Higher or additional rate taxpayers | 145% |
Stress Rate
| Stress Rate | Remortgage with no additional borrowing | Purchase or remortgage with additional borrowing |
|---|---|---|
| <5 year fixed or variable rate | The higher of 5% or pay rate + 1% | The higher of 5.5% or pay rate + 2% |
| 5+ year fixed rate | The higher of 4.5% or pay rate + 1% |
These apply to the property being mortgaged. You might also want to check our criteria on Background BTLs
Tax band calculation
We will determine the applicable tax band.
We will use 75% of all rental income, including the application being placed with us, and 100% of all other income.
For self-employed customers it's the most recent year's figures we'll use.
The ICR is based on the income of the highest earning applicant.
The basic rate tax ICR applies where no applicant has an income higher than the basic rate (intermediate rate in Scotland).
The higher or additional rate ICR applies where any applicant’s income is subject to higher or additional rate tax (higher, additional or top rate in Scotland).
We have no minimum personal income requirement for mortgages which pass our stressed ICRs.
Proof of income will be required if using a 125% ICR for a purchase or remortgage with additional borrowing, and for all top slicing applications.
Top slicing
Top slicing uses a customer’s spare personal income to boost their borrowing amount, by allowing a lower ICR than we may otherwise allow.
We consider top slicing for non-portfolio landlords up to 75% LTV where the term finishes before the 76th birthday.
Top slicing requires a minimum combined personal income of £50,000 (excluding income received from BTL properties).
Top slicing using personal income can be considered if rental income meets a minimum of 100% at the higher of 5.5% or pay rate + 2%.
Affordability calculator
Our affordability calculator will let you know how much we could lend.
It will first look at whether we could lend the amount requested using our stressed ICR rental cover assessment.
If we can’t get to the amount you need but our top slicing assessment might help, it will then ask for personal income details.