Rental income down valuations affecting
buy-to-let mortgage applications
Approvals for buy-to-let mortgages are failing because surveyors are ‘down valuing’ the expected rental income from the private rented sector and are advising mortgage lenders accordingly.
In some cases, surveyors are even down valuing the value of rent already being received by landlords.
The claims were made last weekend in a Sunday Times feature, which says that some buy to let mortgage lenders are rejecting landlords’ rental estimates.
Most buy to let mortgage lenders want to see monthly mortgage repayments covered by rent with a 25% excess, to cover expenditure and void periods. Some lenders want to see 130% of rental cover, while others are happy with 100%.
Down valuation of the potential rental income could result in the refusal of the buy to let mortgage application, or lenders may limit the amount they will offer, often below the borrower’s expectations.
Andrew Montlake, of brokers Coreco, said: “We have seen a shift in the way lenders approach the question of rental expectations. Surveyors have much more power in determining what is a fair market rent. In one recent case, a lender rejected our mortgage application because a surveyor down valued the market rent for a property, even though the landlord had a tenant paying the rent provided on the mortgage application.”
Aaron Strutt, of Trinity Financial, said “It is a good idea for landlords to provide the surveyor with evidence of other rental incomes or valuations locally. However, one of our clients provided 12 comparable rental incomes and we still couldn’t get the decision changed.”
David Whittaker, of specialist lender Mortgages for Business, warned landlords to be realistic. “A landlord’s expectation of rent could rightly be based on the best for the area, while surveyors are more likely to look at the rents being charged.”
According to LSL, PRS rents are falling, marginally, down 0.1% in February, however PRS rents remain higher than they were a year ago.
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