Help 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.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines. To get in contact with him please click here.
