Buy to let lenders scrap rent to interest cover for mortgages

Buy to let mortgage lenders are beginning to make significant changes to their lending criteria by scrapping the rent to interest cover calculation when the investor is prepared to put down a larger deposit according to Mortgages for Business, specialist UK buy to let mortgage broker.

A number of buy to let lenders have amended their lending criteria so if an investor is prepared to put down a large deposit there is no need for potential rental income or the investor’s earnings to be taken into consideration. Normally buy to let mortgages are granted because the rental income is a percentage higher than the monthly interest only mortgage payment.

For example, for mortgages where the investor has put down at least a 30% deposit, GMAC will not take rent to interest in consideration. The Mortgage Works criteria means that for mortgages where the borrower has put down a 25% deposit, again rent to interest cover is not taken into consideration. According to recent Council of Mortgage Lenders statistics, the average Buy to Let investor borrows at 85% loan to value, therefore putting down a 15% deposit.

Jonathan Moore, Head of Marketing at Mortgages for Business comments “By putting down a larger deposit the rent to interest cover will naturally be easier to meet. This is because if the investor is borrowing less over the term of the loan the monthly repayments will be lower, and therefore the rental requirement on the property is lessened. Therefore although lenders are removing a lending safeguard the risk at these borrowing levels is relatively low.”