Buy-to-let policy
We use 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.
ICR
| ICR | Purchase (Porting) or additional borrowing |
|---|---|
| Basic rate taxpayers | 125% |
| Higher or additional rate taxpayers | 145% |
Stress Rate
| Stress Rate | Purchase (Porting) or additional borrowing | |
|---|---|---|
| All tax bands | ||
| <5 year fixed or variable rate | 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.
Proof of income will be required where assessed using a 125% ICR.