Rental coverage BTL criteria

Rental coverage

Please use the rental calculator to check the rental coverage you need before you submit an application. Our Interest coverage ratio (ICR) is calculated based on property tenure, mortgage type and term. The rental figure is based on an unfurnished property and must be confirmed by the valuer.

To calculate the maximum borrowing available, we take the lower of the rent received or how much a valuer thinks the property will rent for.

We apply different ICRs dependant on circumstances, these are as follows:

Applicant Tax rate	Product term	ICR	ICR Rate	ICR	Product term
		Purchase and Remortgage, Capital raising		Straight switch remortgage
Basic rate*	< 5 years	125%	The higher of 6.5% or product rate +2.0%	125%	The higher of 6.0% or product rate +1.0%
Basic rate*	>= 5 years	125%	The higher of 5.5% or product rate +1.0%	125%	The higher of 5.5% or product rate +1.0%
Higher rate**	< 5 years	145%	The higher of 6.5% or product rate +1.0%	145%	The higher of 6% or product rate +1.0%
Higher rate**	>= 5 years	145%	The higher of 5.5% or product rate +1.0%	145%	The higher of 5.5% or product rate +1.0%

*Basic rate taxpayer: Where all applicants on the application have a taxable income of no more than £50,271 in England and Wales/£43,663 in Scotland AND are basic rate taxpayers or pay 0% tax after completion of the application.

 **Higher Rate Taxpayer: Applications where at least 1 applicant has a taxable income greater than £50,271 in England and Wales/£43,663 in Scotland and/or those which are higher rate taxpayers or additional rate taxpayers after completion of the application.

Rental valuation

The rental value figure must be on an unfurnished gross monthly basis on an Assured Short hold tenancy for 6 months or on a proper tenancy if the rent is over £100,000 pa (equivalents in Scotland and Wales). There must be good demand for rental property in the area concerned.

Top slicing

We may be able to use surplus personal income (top slicing) to cover a rental shortfall when we assess affordability for a BTL loan.

In order for your application to qualify for top slicing the following criteria should be met:

Where surplus earned income is being used to cover any rental shortfall (Top Slicing) customers must reside at the same address.
For single and joint applicants, the minimum income (not from rental properties) is £50,000.
The interest coverage ratio based on rental income only must be greater than or equal to 100% and less than the minimum required ICR threshold for the application as set out in this policy
Maximum LTV of 75%

Top slicing is not allowed in these cases:

Lending to first time landlords
Lending where the security is a new build property
Let To Buy applications
Capital raising for unsecured debt consolidation or to cover other personal expenditure (e.g. Car Purchase, Holiday, School fees, Gift to relative).

To see a breakdown of the types of income we accept and the evidence required, please see our income and top slicing criteria page.