Buy to let
No fuss, common-sense approach to lending.
Criteria for buying a rental property
If your client is looking to buy a property to use as a rental, there are a few things that need to be considered. Your client:
should be 21 years old or older
should not own more than 3 mortgaged buy to lets
can be a first time buyer or landlord
What you need to know
- there is no minimum income requirement
- we consider non-regulated buy to let applications on an advised basis
- no owner-occupier requirements
- non-EEA applicants considered
- properties must have an energy performance rating of E or above
- we accept applications from applicants who do not currently own and live in their own home
- the maximum LTV for a buy to let mortgage is 75%
- the minimum property value and purchase price is £50,000
- the minimum loan size is £25,000
The maximum total borrowing must not exceed £2m including our lending. This should include any mortgages the applicant/s is included on jointly. This can exclude any residential and/or holiday let mortgages.
Our loan to value criteria
| Loan to value | Minimum loan size | Maximum loan size | Interest only application |
|---|---|---|---|
| 60% | £25,000 | £1,000,000 | Yes |
| 75% | £25,000 | £750,000 | Yes |
How is affordability calculated?
We require rental coverage for different lending scenarios.
Scenario 1
Your client purchased their property before January 2017 as a buy to let. They would like to remortgage pound for pound.
Rental coverage we require: 125% at 7.65% as rental coverage
Scenario 2
Your client purchased their property after January 2017 as a buy to let. They would like to remortgage pound for pound.
Rental coverage we require: 145% at 7.65% as rental coverage
A stress test calculation is used to assess how much someone can borrow.
How is a stress rate calculated?
The stress rate is calculated based on the product term you choose and the date of the purchase property.
If the application is a pound-for-pound remortgage on a property purchased before January 2017 on a Buy to let basis the income cover ratio (ICR) would be 125% at 5.87%*.
If the property was purchased after 2017 the ratio would be 145% at 5.87%*
*5 year fixed products only. 2 year fixed rate products require 7.65% as rental coverage.
Example of how this would work
If your client has a:
- loan amount: £100,000
- income cover ratio: 5.87%
- rental cover: 125%
Step 1: Work out annual interest
Loan amount x ICR = annual interest
£100,00 x 5.87% = £5,870
Step 2: Work out the minimum Annual Rental Income
Annual interest x rental cover = minimal annual rental income
£5,870 x 125% = £7,337.70
Minimum monthly rental income
£7,337.50 / 12 = £611.46
We accept consumer buy to let applications.
Note: Principality Building Society doesn’t currently lend for regulated buy to let mortgage loans but continues to service existing accounts.
Lettings must be Assured Shorthold Tenancy Agreements (ASTA, England) or Written Statement of Standard Occupation Contract (WSSOC, Wales) with no more than 12 months remaining at application.
Where a tenant (England) or contract holder (Wales) is continuing tenancy beyond the initial ASTA/WSSOC, a new rolling contract is acceptable.
This will be verified by the solicitor in line with our mortgage conditions.
All borrowers must be named on the ASTA or WSSOC.
We won’t lend on third party or sub lettings; this includes company lets and local authorities.
View our Buy to Let and Holiday Let mortgages
Want to find out more, view our Buy to Let and Holiday Let ranges.