Eligibility Markers for Buy to Let Mortgages 75% LTV
Have you been turned down for a 75% buy to let mortgage LTV and don't know why? Here are some of the criteria your typical lender will assess when deciding what LTV rate they can offer:
- Anticipated rental income.
- Annual earnings thresholds.
- Credit scoring or history.
- Stress testing interest rates.
If you haven't been offered any great buy to let mortgage deals 75% LTV rated, likely, your application hasn't met one of the above assessments.
This is where Revolution comes in, as a whole-of-market broker with the skill and experience to recommend specialist lenders and work with property investors to ensure they get the buy to let mortgage 75% LTV they're looking for.
How Your Tax Bracket Impacts Your 75% Buy to Let Mortgage Offers
UK landlords who trade as a private individual, or sole trader, will need to disclose their income tax bracket as part of a mortgage application.
Buy to let mortgage 75% LTV lenders use that information to calculate the minimum rent your prospective investment property needs to achieve - an interest cover ratio.
Here's how it works:
- If you are a basic rate taxpayer, most lenders will want to see rental income at 125% of your mortgage's monthly interest cost. So, if your interest charge is, say, £800 a month, the projected rental income needs to be £1,000.
- Higher rate taxpayers need to achieve a 145% uplift between their mortgage payments and rental income. The same £800 a month interest-only mortgage would need to be for a property commanding £1,160 a month in rent.
- Top rate taxpayers have a steeper challenge and typically need to demonstrate rent at up to 160% of the interest cost - so a mortgage at £800 a month requires an interest cover ratio amounting to £1,280.
On top of that, 75% buy to let mortgage lenders will use a nominal interest rate to calculate that monthly interest charge. So the mortgage cost used in stress testing might be substantially higher than the actual rates being offered!
Most lenders will use a 5% or 5.5% interest rate to work out the 'worst-case scenario' monthly cost and then apply the requisite cover ratio to see whether the rental income is sufficient.
Therefore, higher rate borrowers can find that their lucrative investment opportunity doesn't qualify for one of the best 75% buy to let mortgages, purely because the stress test uses a higher ratio.
Getting Great Buy to Let Mortgage Deals 75% LTV as a Higher Rate Borrower
The excellent news is that the Revolution team can recommend several solutions if you've found that you don't qualify for a lower 75% buy to let mortgage due to stress testing criteria.
One option is to look for a lender who stress tests your mortgage affordability based on your pay rate (more on that next!) or to use top-slicing.
Top-slicing means topping up the rental income with other revenue streams to demonstrate that you can comfortably afford the interest payments.
In effect, you get easier access to the best 75% LTV buy to let mortgages, adding your income to supplement the rental returns to meet the interest cover ratio requirements.
There are usually a few policies around top-slicing:
- You may need to meet the 125% affordability assessment and then use top-slicing to supplement the income required as a higher rate taxpayer.
- Many lenders will want to see a minimum income threshold, which could be anything from £10,000 (in addition to rental earnings) up to £40,000.
- Achieving buy to let mortgage eligibility in this way isn't usually possible for later life borrowers or landlords reaching an upper age limit by the end of the term.
Not all lenders will accept this, so it's vital to work with a skilled broker with in-depth knowledge of the BTL lending market and the lenders with 75% LTV buy to let mortgages who will use top-slicing to demonstrate affordability.
The Benefits of Buy to Let Mortgage Rates – 75% LTV 5-Year Fixed Term
Fixed-rate buy to let mortgages, interest-only 75% LTV products are often some of the best options for investment landlords.
The five-year fixed term is optimal. It provides a good balance between the rates available on shorter-terms and more extended periods where lenders have less certainty about interest rate fluctuations.
Another benefit to opting for 75% LTV buy to let mortgages is that you can usually borrow a larger value. Shorter two or three-year fixed term buy to let mortgages are available, but given the lower period, the stress testing process tends to be more rigorous.
Therefore, if you're finding it tough to be offered one of the top buy to let mortgages 75% LTV based, it might be as simple as extending the fixed term to secure the borrowing you need with a 25% deposit.
How Income Impacts Your Application for a Buy to Let Mortgage, Interest-Only, 75% LTV
Pay rate lending isn't something many property investors know about, so it's well worth exploring the options - give the Revolution team a call if this is something you'd be interested in looking at more closely.
Buy to let mortgage UK 75% LTV products assessed against pay rates are an excellent option for applicants who have been offered a lower LTV and find themselves unable to proceed with a new property purchase.
Examples might include:
- Needing a 75% buy to let mortgage LTV against a high-value property without significant enough rental value to meet affordability stress tests.
- Investing in low rental yield properties that positively impact your portfolio coverage or diversification in an in-demand area.
- Purchasing a rental property where current rental income is relatively low, but where the property, or the rental charges, are expected to appreciate considerably in the future.
Any of these scenarios would be potentially lucrative for a property investor, but using the stress testing process as described would almost certainly mean needing a much higher deposit or qualifying for non-competitive rates on buy to let mortgages 75% LTV rated.
Revolution Brokers will always take a holistic view to assess your circumstances and suitability for a buy to let mortgage UK 75% LTV. We aim to understand the purpose of your investment decisions - whether or not it fits into the typical stress testing framework.
Suppose you have a good credit history and decent security in place; a pay rate based buy to let mortgage may be an attractive option to secure a buy to let mortgage 75% LTV. You can usually borrow around 20% more in this way and achieve maximum LTVs on rental mortgage products, which wouldn't be possible otherwise.
To explore any of these alternative borrowing options or compare the best buy to let mortgages 75% LTV based, get in touch with the team.
