Buy To Let Mortgage With No Proof Of Personal Income
Are you looking for buy to let mortgages based on rental income only at a low fixed rate?
Do you want to avoid lots of questions about your personal income and circumstances?
- Buy to let mortgage based on rental income only
- No proof of income required
- Initial rate of 2.13% fixed for 5 years
- Are you older than 25 and younger than 80 at the mortgage end?
- Small valuation fee and legal fee
- 25-year term
- Interest-only or Repayment
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Finding a buy to let mortgage no proof of income required?
Lenders like to see if your personal income is strong, so a buy to let mortgage without proof of income is slightly different.
Because some people have companies and retain earnings to save personal tax, proving personal income may be difficult or impossible.
A buy to let landlord who is aggressively acquiring more and more properties may live very frugally may be rent-free with a parent or other family member so declaring substantial personal income may be impossible.
If a landlord has income from overseas that a lender does not accept it could be the case that they may need a buy to let mortgage no proof of income.
Some lender’s income for affordability must be evidenced and be in Pounds sterling, which is why there is a demand for a buy to let mortgage without proof of income.
Many individuals are looking for how to get a buy to let mortgage without a job or buy to let mortgage no minimum income because it may suit their short term needs to simply live off savings.
Some investors in BTL rentals have no income because they are carers for children or a sick family member, but this does not mean they are not capable of servicing a buy to let mortgage.
A BTL rental investor may have a good deposit but may have recently lost their job and may have made a conscious decision to look for rental properties or HMO investments.
Buy to let mortgages based on rental income only
If you have a decent-sized deposit coving your mortgage with your rent should be easy.
BTL and HMO Lenders Stress Tests
A stress test is used by all lenders when assessing the suitability of an applicant for a buy to let mortgage product.
There are two factors to consider:
- The rental income
- The ability to repay the interest on the mortgage. This is referred to as the Interest Cover Ratio, referred to for short as ICR.
To give you an example of how a stress test works, consider the following hypothetical example:
A mortgage for a £150,000 property, assuming a 5.5% interest cover rate is applied brings the monthly interest payments on the BTL mortgage to £687.50 (150,000 x 5.5% = 8250 / 12 months = 687.50). When you factor in the notional rate for the assumed rental income of 125% for stress testing that brings the real monthly cost to £859.38.
In that situation, borrowing £150,000 to invest in a buy to let mortgage would require you to be able to rent the property at £859.38 PCM. Theoretically, you’d expect to rent anywhere above your interest payments of £687.50, but when the stress test is applied before you get your buy to let mortgage approved, this isn’t the case. That’s why it’s called a stress test. You must be able to prove you can afford the repayments.
The stress test applies to the total amount you’re borrowing and not the property price. If in the case of £150,000, you were to be applying with a 50% deposit, the stress test would apply to the £75,000 being borrowed.
The stress test uses an interest cover rate of 5.5% and a notional rate of 125% of rental income. That’s increasing to 145% and will need taking into account before applying for a buy to let mortgage
Currently, this only applies to new buy to let mortgage applicants and not landlords looking to remortgage.
The Buy to Let Stress Calculations You Need
There are two things you need to know to begin calculating what you will be able to borrow.
The rate: Work with a minimum of 5.5% Interest Cover Ratio. That is the minimum you’ll need to account for.
Your rental margin: Use the higher rate of 145% because even if a lender is still using the 125% margin for your rental income, it will rise to 145%. It’s only a matter of time.
A Buy to Let Stress Test Calculator Differs from a Mortgage Stress Calculator
Do not mistake a mortgage stress test calculator – UK specific – to work out interest-only payments on a buy to let mortgage
The type of mortgage you’re applying for affects how you’re tested against your suitability for any mortgage. The most basic mistake with buy to let mortgages would be to use an online mortgage calculator because those are based on income multiples and your ability to meet the affordability assessment criteria. That’s much different because it’s used for personal borrowing.
A buy to let mortgage is commercial in nature so it requires you to not only pass the affordability criteria for personal borrowing but also the much more stringent stress test as well.
To do that, lenders differ in how they assess your ability to repay. Some will take into account your existing income, while other lenders will take into account the future rental income, while also factoring for dormant months when there are no tenants in the property. Some lenders will also assess your affordability for this type of mortgage product by taking into account your personal tax bracket as the income is taxable.
A personal mortgage stress test is only applicable to borrowing for your own home. Not for the purposes of buy to let. When you plan on leasing the property, buy to let mortgages will use the stress test, and that’s what’s changing at the moment.
Changes to the Buy to Let Stress Test 2021
Major lending institutions are rapidly rolling out their buy to let stress test changes throughout 2021. Both the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA) have put their weight behind the consultation paper CP11/16, which some experts in the mortgage sector are describing more of a statement of intent. Ryan Bembridge, writing for mortgageintroducer.com states…
“…in the case of interest cover ratio and stress test changes which need to be implemented by the start of next year – the market norm is likely to be circa-5.5% at 145%”
Previous percentage figures for rent calculations were worked out at 125%, therefore, there is expected to be a 20% increase to rental income projections.
Mortgage Solutions UK report…
“This year we have already seen The Mortgage Works, Keystone Property Finance, Foundation Home Loans, Barclays and Newcastle Building Society upped their stress test calculations for individual borrowers to 145% at 5.5%.”
It’s worth pointing out that these changes are to be introduced to the buy to let lending sector as a phased implementation. As far as phasing it into the sector goes, it is being introduced rather quickly. Lenders have until the year-end to implement the changes, but it’s already clear that it’s being implemented faster, which indicates that many lenders are in agreement of these being important changes.
Online Rental Cover Calculator: Be Wary of the Figures
There are many calculators online on UK websites that let you work out how much rent you’ll need to charge to cover the interest-only payments on a buy to let mortgage. A buy to let stress test 2021 calculator must use the 5.5% ICR and a notional rental income of 145%. If it doesn’t, your figures will be inaccurate and therefore won’t be satisfactory for the updated stress test requirements. For accurate results, use the formula further down to work out what you can realistically afford to borrow on a buy to let mortgage.
To ensure you have the worst-case scenario figures, use the Basic Higher Rate of 145% of rental income and the mortgage ICR of 5.5%.
The calculation formula to use is:
- “Buy to let mortgage price” x 5.5% = “annual interest rate” / 12 months = Your monthly interest repayments (ICR)
- Multiply the ICR coverage by 145% for the total you can borrow.
In practice, it would like this:
Buying a £100,000 property using a 50% deposit, you’d be borrowing £50,000.
£50,000 x 5.5% = £2,750 / 12 months = £229.17 interest only payments.
229.17 x 145% = £332.30.
You would need a minimum rental income of £332.30 to borrow £50,000 on a buy to let mortgage to meet the new stress test requirements coming into effect in 2021.
An online buy to let stress test calculator should use that same formula starting in 2021.
That’s not the only figures you need to account for though. There’s also the stamp duty for landlords and the interest as there’s no longer interest relief for landlords using buy to let finance. For that reason, it’s worthwhile to consult with a financial advisor or your accountant when you’re looking to invest in properties with the goal being to produce income by renting the property.
Analysis of the Buy to Let Stress Test
This is a positive change to the lending industry as it ensures that in the event that tenancies are vacant, there are funds left to make the payments on time. In addition to that, there’s a higher cushion ensuring there’s enough rental income coming in to maintain the property.
Also, note that those figures are likely to be used by main lenders. Figures could increase above the 5.5% ICR in cases where higher risk is involved due to adverse credit. When you’re using a specialist lender to access adverse credit buy to let mortgages, you’re best to go through a broker who knows the rates they expect your mortgage to be approved at. In most cases, rental cover calculators will not give you a realistic ballpark figure to work from.
What the PRA and FCA are doing with these changes is raising the minimum. They are not placing caps with a maximum so only the mainstream lenders will be making their stress tests more stringent. The subprime market focuses on risk management because they lend to borrowers who have impaired credit. Many will already use a higher baseline ICR because the rates and deposits are higher.
Buy To Let Mortgages Based On Rental Income Only: Conclusion
Buy to let stress calculators are best avoided when you have bad credit
With impaired credit, it’s unlikely that any online calculator will give you a real picture of what the figures are likely to be for you. They work out rates based on pre-set criteria and not your circumstances. While the changes taking place will mean that the baseline ICR is calculated at 5.5% for the mortgage interest, that’s likely to apply to landlords experienced and new with excellent credit reports. Any blemishes on your credit history will affect the real interest rate you’re charged.
It’s possible to get a mortgage with under 5.5% interest, however, if you’re approaching lenders with a credit history showing CCJs, active DMPs, quite a few defaults and the likes, chances are you’ll be met with resistance, forced into the subprime market and the offers could exceed the 5.5% that is considered a high rate for mainstream lenders. When put into practice from a subprime lenders perspective that can be average rather than high.
The only true way to understand how impeded your credit reports are making you to lenders offering buy to let mortgages is to get bespoke advice from a mortgage broker who understands lenders risks and the ICRs used by a variety of different lenders.
The 5.5% ICR and the 145% notional rate for rental income to cover the interest-only payments leaving you with change to spare is only going to be the minimum to access any buy to let mortgage. There’s no upper cap, which makes it all the more critical to get expert advice based on your own personal circumstances before agreeing to a long-term secured loan.
How to get a buy to let mortgage without a job? – A common question
Many people are looking for a buy-to-let mortgage based on rental income only, essentially a loan with no proof of income required. It’s common for some lenders to ask questions about your holidays and how often you get your hair cut which in the case of a BTL property mortgage many would think a bit silly!
Some lenders want a buy to let mortgage minimum income requirement, but some lenders don’t care too much.
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Navigating Buy to Let Mortgages with No Proof of Income in the UK
Securing a buy to let mortgage in the UK can be a promising investment avenue, especially for those banking on rental income to bolster their financial portfolios. However, what if you lack a regular income stream or cannot provide adequate income proof? Fortunately, the UK mortgage landscape has evolved to offer buy to let mortgage without proof of income and buy to let mortgage no minimum income, tailored to accommodate unique financial situations.
1. A Deep Dive into Buy to Let Mortgages
In its essence, a buy to let (BTL) mortgage is a loan taken out to purchase a property intended for renting. Unlike traditional mortgages, the primary determinant for approval and borrowing limits is the potential rental income of the property rather than the borrower’s income. This distinction paves the way for buy to let mortgage without income or those with low income to enter the market.
2. The Importance of Rental Income
For buy to let mortgages based on rental income only, the prospective rental income stands as the primary metric. This figure is central to the ICR calculation BTL (Interest Cover Ratio), which is a formula that lenders use to determine how much can be borrowed. The ICR mortgage calculation ensures that the projected rental income sufficiently covers the mortgage interest, with some surplus.
Using tools like the mortgage works rental calculator or buy to let remortgage calculator can provide insights into this calculation. In essence, it helps potential investors understand mortgage rental income dynamics, offering clarity on the feasibility of the investment.
3. The Buy to Let Stress Test
The buy to let stress test and buy to let mortgage stress test are critical evaluation tools lenders use to gauge the sustainability of a BTL mortgage. Essentially, it assesses if a borrower can cope with interest rate fluctuations and still manage their mortgage.
By employing tools such as the stress test buy to let calculator, potential investors can understand how rising interest rates might impact their BTL investment. For instance, the stress test mortgage calculator UK allows borrowers to factor in various scenarios, giving a more holistic picture of their financial commitment.
4. The Allure of No Proof of Income BTL Mortgages
Understanding how buy to let works reveals that rental income, not personal income, is the key. This allows for products like the buy to let mortgage no income required or buy to let with no income. Essentially, investors don’t need to provide traditional proof of their personal income.
The appeal of such mortgages extends to a variety of individuals, including:
- Those considering how to rent a house without proof of income UK.
- Individuals exploring options like renting without proof of income UK.
- Those contemplating a buy to let mortgage with no income or even buy to let mortgage with no minimum income.
5. Calculating the Buy to Let Mortgage Affordability
Key to a successful BTL investment is understanding the buy to let mortgage affordability. Several calculators and tools can help. From the mortgage stress test calculator UK to the ICR calculator or the buy to let spreadsheet 2024, potential investors have a range of resources to gauge their affordability.
Moreover, when understanding how much is a buy to let mortgage or inquiring about how much can I borrow mortgage buy to let, tools like the lloyds mortgage calc, buy to let mortgage deposit calculator, or the mortgage works btl calculator can be invaluable.
6. Interest-Only BTL Mortgages
An interest only buy to let mortgage is a popular choice among investors. This is because, in such arrangements, monthly payments only cover the interest on the loan, not the capital. At the end of the mortgage term, the original loan amount remains and needs to be repaid.
This model allows for lower monthly payments and, when coupled with options like buy to let mortgage low income, offers flexibility to a broader range of investors. By understanding the interest cover formula, borrowers can ascertain the feasibility of an interest only or a buy to let mortgage interest only or repayment.
7. Comparing BTL Mortgages
Comparison is the bedrock of informed decision-making. Whether considering woolwich mortgages buy to let, tsb buy to let mortgage, or any other lender-specific product, tools like btl mortgage comparison or compare mortgage rates UK can help streamline the selection.
Additionally, for those considering properties that might need refurbishment, it’s essential to factor in external costs. Services such as a structural engineers report near me can provide invaluable insights into the property’s structural integrity.
8. The BTL Landscape in the UK
From the Scottish market, with options like buy to let mortgage Scotland, to the broader UK canvas offering buy to let mortgages UK, the BTL landscape is diverse and dynamic. Whether you’re assessing buy to let mortgage percentage, rent coverage ratio, or contemplating the buy to let mortgage calculator 20 deposit, understanding regional nuances is pivotal.
In summary, the UK’s buy to let market offers avenues for diverse investors, irrespective of their personal income. Through careful planning, understanding the intricacies of rental income and leveraging the myriad of tools available, securing a BTL mortgage without traditional income proof is not just plausible, but also a potentially lucrative venture.