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Will More Lenders Allow Landlords to Use Income to Cover Rental Shortfalls?

Barclays has loosened its buy-to-let lending criteria by allowing applicants to use their own disposable income to guarantee any shortfall in the rent while previously they were required to provide evidence that the rent would cover it.

The lender uses a rate of 5.79% to assess affordability, as opposed to the mortgage rate itself. For example, a £100,000 loan, even if fixed on a much lower fixed rate of 3.29% for example, would require a rental income of £603 a month to cover the mortgage (£100,000 x by 125% x 5.79%/12).

Following a successful pilot scheme conducted last year, Barclays states that under the new approach, customers would be required to complete a full income and expenditure assessment involving disclosure of net income, commitments and dependents, all residential mortgages (including Permissions To Lets) plus the total of all BTL mortgages outstanding and the total rent received. The bank also makes it clear that any applications will be rejected if they plan on overlapping the mortgage into retirement.

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