Miss Peters: Buy-to-Let case study
Overcoming Buy-to-Let barriers created by ICRs
Miss Peters is a higher rate taxpayer who owns a portfolio of Buy-to-Let properties in her name.
"It was a relatively expensive property in an area where rental values are lower and as result, the rental yield was also low."
What did she need?
Miss Peters had asked her broker to arrange a remortgage of one of her existing Buy-to-Let properties which had a stable long-term tenant.
It was a relatively expensive property in an area where rental values are lower and as result, the rental yield was also low. The higher value also meant that moving the property into a limited company was unattractive.
Why was she facing challenges?
A number of lenders had declined to offer because the property had been bought before Interest Coverage Ratios (ICR) were at today’s level and it failed all their ICR requirements.
This is a common barrier, particularly when the landlord has held the property for some time.
How did we help?
We don’t assess Buy-to-Lets with an ICR calculation but instead consider an applicant’s overall financial situation - earned income together with a mortgage and other credit commitments - and use our affordability model.
Miss Peters had a relatively modest residential mortgage and a sensible Buy-to-Let portfolio and by considering her earned income with 50% of the subject property rental income, her overall proposition offered good quality, low-risk lending.