Rental Stress Tests
Supercharge Your Borrowing Power
Rental Stress tests are used by all lenders to assess your suitability for a mortgage product. Given the current economic climate, lenders understandably want to check that you can afford the monthly payments, keeping in mind all of your other expenses and an added margin for risk. Knowing how this is calculated means that you will fully understand the potential for your portfolio and just how much you can borrow on a given property.
Lenders generally use two major metrics to calculate your affordability:
- Interest Cover Ratio (ICR) – simply your ability to repay the interest on your mortgage
- Rental Cover Rate – the rental income for the property
Typically Buy to Let lenders look for an ICR of between 3.5%-5.5% and a Rental Cover Rate of between 125%-145%. That being said, with our lender access and Buy to Let expertise we may be able to help you secure the mortgage you want and mitigate any potential stress test barriers.
Unlock Your Full Portfolio Potential
We’re all unique and the same can be said about your financial potential, this is why we believe no one-click calculator can give you a definitive score for your borrowing potential.
The quickest, easiest and most reliable way to check your suitability for a particular mortgage offer is by calling us today. With just one quick phone call, we can discuss exactly what you are looking for and compare every deal out there for your individual needs, saving you a whole load of time and stress.
It is widely known that Rental Stress Tests have been under much scrutiny by The Bank of England’s Prudential Regulation Authority (PRA) over the last few years, BUT we know the criteria inside and out so you’ll always get the latest advice and best deals to maximise your portfolio.
We appreciate that you may just be looking for a ballpark figure right now, so to give you a rough idea of your borrowing potential. You can calculate the approx rental interest that you will need using this formula:
Loan amount x ICR (5.5%) = Annual Interest
So, for example, to put that into numbers, for a loan amount of £350,000, you will need an Annual Interest of £19,250.
Knowing the Annual Interest also allows you to calculate the minimum Annual Rental Income that the lender might expect. You can calculate this with this formula:
Annual Interest x Rental Cover Rate (145%) = Minimum Annual Rental Income
Using the above example of £350,000, this means your property would need a Minimum Annual Rental Income of £27,912.50 – approx £2326 a month.
We help the savvy landlords of this world – the driven, bold, successful portfolio landlords who have no time for bad deals or boring paperwork
Rental Stress Tests have not always been this way, historically lenders were able to be a lot more flexible with their individual thresholds but due to PRA’s regulation changes and of course the harsher tax environment for personal landlords, lenders are now more cautious and it is even more important to have expertise on your side.
By cultivating relationships with every lender, we can fight your corner in honest and frank discussions. We won’t take no for an answer when it comes to getting you the right deal. An average mortgage is simply not an option here.
There are so many factors to consider when choosing the right mortgage for your portfolio, so to get a true picture of all of the deals available and your maximum borrowing potential, get in touch today to speak to one of our Buy to Let experts. We will be able to find you the very best deal and may even be able to use ‘topslicing’ to get you a larger loan amount.
Don’t Get Stressed, Get Sorted
Feefo Platinum Trusted Service Winner 2020 ⭐️⭐️⭐️⭐️⭐️
As a leading Buy to let Specialist, we can help you navigate all stress test requirements and lender criteria quicker and easier. To check your eligibility or to discuss all of your options, get in touch today by calling 0333 060 7669 or by submitting your details below.