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100% of rental income used for residential mortgage applications

by Payam Azadi

secured loanHelp the affordability of your residential mortgage by taking in your 100% of rental income on your buy to lets

I want a residential mortgage, and although I work; I seek a Lender that will use 100% of rental income from my buy to let in their affordability assessment to maximise the amount they are willing to lend.

Many of my clients want to borrow the maximum on their primary home. One way to boost the amount available is to factor in the rental income from their buy to lets.

This article explains how the income can be used effectively but I would also recommend that you seek professional mortgage advice, such as that available from Niche Advice, for your own individual circumstances.

To set the scene this information is aimed at someone who has ‘an occupation’ but also receives rental income from let properties.

Rental income declared to the taxman

In order for Lenders to consider taking on board income from let properties they will need evidence that it exists and has been declared to HRMC. Ordinarily, the document that is requested is a HMRC Tax Calculation (SA302) which shows property profit. Importantly it is only profit that can be used.

‘Profit’ from properties shows a return after the deduction of costs such as property maintenance, management fees, mortgage payments, service charges etc.

The profit is then normally averaged over a two or three year period so that they apply a figure that is the closer to the norm rather than take one year which may have spiked or troughed.

Once the figure is reached it is either taken into its entirety or the Lender will treat as secondary income and only take a fraction of it, say 50% or 60%, or worse still none at all.

100% of rental income

Some of the Lenders I use will take 100% and apply an excellent income multiple. This can make a sizeable difference to the maximum that will be lent. How so? Well the income figure will be times by the Lenders income multiples so the disparity in borrowing widens.

For example:
If the rental income is £20,000, the table below shows the amount extra you could borrow when applying income multiples. This is of course subject to full underwriting:

Rental income p.a.
(amount taken depends
on the Lender)
4 x income
(multiple depends
on the lender)
4.5 x income
(multiple depends
on the lender)
5 x income
(multiple depends
on the lender)
0% (Not taken) £0 £0 £0
50% (£10,000) £40,000 £45,000 £50,000
60% (£12,000) £48,000 £54,000 £60,000
100% (£20,000) £80,000 £90,000 £100,000

Remember the figures above are the increment to your main occupation earnings and can serious improve your borrowing potential, and help you realise a dream home.

If you’re looking to buy a residential mortgage and want to use hundred percent of the rental income received on other properties, please call complete the online enquiry form on this page or alternatively call us on T: 020 7993 2044.

 

Filed Under: Mortgages

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AS A MORTGAGE IS SECURED AGAINST YOUR HOME OR PROPERTY, IT COULD BE REPOSSESSED IF YOU DO NOT KEEP UP THE MORTGAGE REPAYMENTS.
If you are thinking of consolidating existing borrowing you should be aware that you may be extending the terms of the debt and increasing the total amount you repay. Niche Advice Limited is a Credit Broker and does not lend money directly to clients. Niche Advice Limited is authorised and regulated by the Financial Conduct Authority.

FCA Number: 750263.

Commercial Buy-to-Let and commercial mortgages are not regulated by the Financial Conduct Authority.

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