BTL Affordability Boosted by Santander

Santander has reduced the affordability stress tests on its buy-to-let (BTL) mortgages.

On Standard Buy-to-Let a Pay Rate affordability test reduction from 7.31% to 7.15%

• Before, a rent of £1,000 would have got you a mortgage of £131,326.95 for basic rate taxpayers
• Now, a rent of £1,000 will get you a mortgage of £134,265.73 for basic rate taxpayers

An extra £2,938.78 in borrowing is available, however Santander do have a maximum LTV of 75%.

On 5-Year Fixed Rates & like-for-like remortgages a Pay Rate affordability test reduction from 5.31% to 5.15%

• Before, a rent of £1,000 would have got you a mortgage of £180,790.96
• Now, a rent of £1,000 will get you a mortgage of £186,407.77

An extra £5,616.81 in borrowing is available, however Santander do have a maximum LTV of 75%.

Santander still requires 125% rental cover for basic rate taxpayers and 145% for higher rate taxpayers, unlike other Buy-to-Let Lenders they do not offer Limited Company Buy-to-Let Mortgages so don't have a lower rental cover.

If you are a higher rate taxpayer a 5-Year Fix maximum loan would be £160,696.35 instead of £186,407.77.

In Comparison

TBC

How to do the Maths?

#The Formula:
Rent (times) 12 (divide) ICR Rate (divide) Stress Rate

#Before, it was:
£1000 (times) 12 (divide) 125% (divide) 7.89%

#But now it is:
£1000 (times) 12 (divide) 125% (divide) 5.89%

#or
((1000*12)/125%)/5.89%

Terminology

What is PayRate? In this context its the mortgage rate charged in the initial 2-Year Fixed period of the mortgage.

What is Interest Cover Ratio (ICR)? When considering Basic Rate Taxpayers, most lenders typically require rental income to cover 125% of the interest charged on the loan. This means that the rental income must cover all of the rent plus an additional 25%.

What is Like-for-Like Remortgage? This is when you remortgage with no additional borrowing. You get the same mortgage amount you currently have but with a new mortgage lender.