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Buy to Let Mortgages - Rental Yield
Most lenders undertake an assessment based on the rental income to calculate the maximum loan size that they are willing to lend but some still insist on a minimum provable earned income. Lenders are ideally looking for 115-130% coverage of the monthly payment (on an interest only basis) in rental income at the either the charge rate (usually if the scheme offered is a fixed rate) or the underlying rate charged. In simple terms, this would work as follows:
| Property Value | = | £135,000 |
| Deposit(25%) | = | £33,750 |
| Required Mortage | = | £101,250 |
Mortgage Product: 3 year fixed rate 4.79% and lender requires 125% interest cover
£101,250 X 4.79% X 125% = minimum annual rental income required
In this example, annual rental income of at least £6063 or £506 per calendar month would be needed to ensure that only 25% deposit (£33,750) is required. In view of lenders increased deposit requirements in the current lending climate, it is unusual & would be a poor investment if the proposed project did not meet this calculation.
Use our Buy to Let calculator to see how much you may be able to borrow and use our mortgage sourcing tool to find the most competitive buy to let mortgage rates available.
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