Buy to Let Lending Criteria for background BTL portfolio
Lending criteria
Background BTL portfolio
All background properties must collectively meet a minimum rental calculation of 145% interest coverage ratio (ICR) at a stressed rate of 5.0%.
How we assess coverage
When reviewing a BTL portfolio we do individually assess properties, but where an individual property in the portfolio doesn’t meet the 145% rule, but other properties in the portfolio would cover the shortfall, we do consider the portfolio as a whole.
Examples:
Strong Portfolio
| Property 1 | Property 2 | Property 3 | Property 4 | Property 5 |
|---|---|---|---|---|
| Self-financing 150% | Self-financing 146% | Self-financing 148% | Self-financing 140% | Self-financing 167% |
Whilst property 4 is not meeting the 145% rule, collectively the remaining properties are self-financing by 153%.
This is sufficient to cover the shortfall, pulling up the portfolio collectively to 150%.
Weak Portfolio
| Property 1 | Property 2 | Property 3 | ||
|---|---|---|---|---|
| Self-financing 145% | Self-financing 137% | Self-financing 148% | ||
The portfolio as a whole is not meeting the 145% rule, and whilst one property is above the required 145%, this is not by a substantial amount.