Buy-To-Let Mortgages On Offer
Based On Rental Income
There is good news for UK based property investors looking for a buy-to-let mortgage as lenders are beginning to understand how landlords make profit from property. Now one lender is taking the lead and offering buy-to-let mortgages based on rental income without worrying about a borrowers personal income.
Mortgage lender, BM Solutions, part of the Lloyds banking group, has removed their minimum £25,000 (GBP) income requirement from all of their buy-to-let mortgages.
Instead, the lender will make a buy-to-let mortgage offer based on the potential rental income expected to be generated by the rental property purchase, rather than being based on a borrower’s employed earnings.
The BM Solutions Buy-To-Let mortgage affordability calculation remains at 125% of the rental income, but the overall lending criteria have been tightened.
A spokesman for BM Solutions said: “We regularly review our buy-to-let policy to ensure that we can support the increasingly important role of the private rental sector. Our move to take away the minimum income requirement acknowledges that as buy-to-let affordability is based on rental income, rather than personal income, we can make it more accessible to more landlords. They will now simply need to include income details on their application. At the same time, we are updating our BTL affordability criteria. This remains at 125% of rental income, but at the higher of either the initial pay rate or a notional rate which is currently 5%. We believe that this is the right thing to do to ensure borrowers are in the best possible position to be able to manage future payments if their circumstances change.”
Surely other mortgage lenders will follow suit as they will not want to miss out on the potential profitability that BM are tapping into by offering mortgage products that are based solely on rental income.
This could be the start of a very lucrative time for new and experienced property investors and landlords expanding rental property portfolios, however the Lloyds group do not allow borrowers to have more than 3 mortgage products from any of their mortgage subsidiaries, so property investors need to check the underwriters of mortgages carefully.
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