BTL Affordability Boosted by Landbay for Remortgages

Landbay has reduced the affordability stress tests for like-for-like remortgages on its buy-to-let (BTL) mortgages.

Instead of using the standard pay rate plus 2%, the stress test is based simply on the pay rate, aligning the 2-Year Fixed Rate Mortgage with Stress Tests on 5-Year Fixed Rate Mortgages.

This is ideal for landlords looking to remortgage with no changes to their current borrowing requirements and who are seeking a shorter-term product where meeting affordability criteria may have presented issues.

If we look at a standard individual basic rate taxpayer, getting a 75% LTV 2-Year Fix at 5.89%

• Before, a rent of £1,000 would have got you a mortgage of £121,673
• Now, a rent of £1,000 will get you a remortgage of £162,988

An extra £41,000 for like-for-like remortgages.

In Comparison

LandBay's update aligns remortgage like-for-like stress tests with other Buy-to-Let (BTL) Mortgage Lenders such as The Mortgage Works. Both lenders now offer similar like-for-like stress tests. However, TMW provides lower rates and offers a comparable product at 4.24% but has a minimum stress rate at 4.5%. This means that landlords receiving £1,000 rent can borrow up to £213,333.

In comparison to other mortgage lenders:

• £213,333 from The Mortgage Works (Min 4.5% or PayRate = 4.5%)
• £174,545 from BM Solutions (Min 5.5% or PayRate + 0.50% = 5.5%)
• £162,988 from Landbay
• £150,234 Accord Mortgages (Min 6.0% or PayRate + 1.00% = 6.39%)
• £135,401 Fleet Mortgages (PayRate + 2.00% = 7.09%)
• £133,518 Precise Mortgages (Min 5.5% or PayRate + 1.55% = 7.19%)

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.