Rental coverage BTL criteria
Lending criteria
Rental coverage
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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:
| Purchase and Remortgage, Capital raising | Straight switch remortgage | ||||
|---|---|---|---|---|---|
| Applicant Tax rate | Product term | ICR | ICR Rate | ICR | ICR Rate |
| Basic rate* | < 5 years | 125% | The higher of 5.5% or product rate +2.0% | 125% | The higher of 5.5% or product rate +1.0% |
| Basic rate* | >= 5 years | 125% | The higher of 4.75% or product rate +1.0% | 125% | The higher of 4.75% or product rate +1.0% |
| Higher rate** | < 5 years | 145% | The higher of 5.5% or product rate +2.0% | 145% | The higher of 5.5% or product rate +1.0% |
| Higher rate** | >= 5 years | 145% | The higher of 4.75% or product rate +1.0% | 145% | The higher of 4.75% 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.
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.
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