Buy to Let Hub

Buy to Let Hub

This hub provides you with everything you need to know about our Buy to Let policies and Income Coverage ratios, along with your client’s eligibility.

 

The Basics

**The following below criteria applies to all application types.

 

Eligibility:

The property must be in England, Scotland, Wales or Northern Ireland.

The property must be a residential property owned by the applicant(s) and not for their own use at any time.

Applicant(s) must be UK nationals, EU nationals or have indefinite leave to remain in the UK. – Please note providing one applicant is a UK national, EU national or have indefinite leave to remain the other applicant does not need to be (please also see Foreign Nationals policy in the A-Z Criteria).

 

Applicants must be resident in the UK at the time of application.

 

Applicants must be at least 18 years old at the time of application. 

 

Minimum term is 3 years

Maximum term is 35 years

 

Maximum lending limit:

 £3.5m across all residential and buy-to-let mortgage lending with NatWest or RBS

 

Maximum LTV:

75% or 65% for New Build properties

Maximum portfolio:

Only landlords with 10 or less buy-to-let or consent-to-let properties mortgaged or unencumbered on completion of this application, will be considered for a mortgage

 

Small landlord definition:

Those with three or less buy-to-let or consent-to-let mortgaged properties on completion of this application, excluding limited company buy-to-lets or unencumbered properties

Portfolio landlord definition:

Those with four or more buy-to-let or consent-to-let mortgaged properties on completion of this application, excluding limited company buy-to-lets

 

 

No Minimum Income Required:

No Minimum income* required for BTL applications

*includes £0 income.

 

We cannot accept:

 Applications for HMO, multi-unit blocks, business partnerships or limited companies although NatWest Business Banking may be able to assist.

 

36 month ASTs and DSS tenancies are accepted:

We accept 3 year ASTs*. 

We accept tenancies whereby the property tenants will be in receipt of Housing Benefit or Housing payment as part of Universal Credit. 

 

*Assured Shorthold (England & Wales) tenancy agreement required/a Private Residential Tenancy under the Private Housing (Tenancies) (Scotland) Act 2016 (Scotland). 

 

Capital Raising – Acceptable Purposes:

  • Permanent home improvements to the mortgaged property (includes extending the current lease)*

  • Buying out an existing title holder/partner*

  • Equity raising to purchase another property (residential or Buy to Let)

*The mortgaged property held by or proposed as security to the Bank for both the current mortgage amount and additional borrowing being applied for.

All other reasons for a further advance on a Buy to Let property are unacceptable

 

Consumer BTLs:

Our approach to identifying these customers is based on how they view their buy-to-let activity. We anticipate consumer buy-to-let will only apply to customers remortgaging a buy-to-let property where their objective is not to benefit from house price growth or rental income.

We include this question on our application: Will the property be let out for investment purposes?

By ‘investment’, we mean that you are looking to benefit from rental income or future house price growth.

If the answer to this question is ‘No’, the following message is displayed: Your selection has indicated consumer buy-to-let status. At present we do not offer this type of lending. In this case, the application will not progress.

 

Family Members cannot reside in the BTL property.

 

Sourcing Tip* - If property will be used as an investment property, ensure that sourcing isn’t filtered by Consumer Buy-to-Let so that NatWest appears on your sourcing.

We do not offer consumer buy-to-let mortgages.

 

Reduced Stress rate on all 5 year products

 

Stress rate reduced to 4.5% on all applications with a 5 year product.

Small Landlords and Like for Like Remortgages

Small landlord definition:

Those with three or less buy-to-let or consent-to-let mortgaged properties on completion of this application, excluding limited company buy-to-lets or unencumbered properties

 

Eligibility and Application Types:

Must have a residential or consent-to-let property on completion.

 

Small Landlord Applications: Purchase, Remortgage Like-for-Like and Remortgage with additional borrowing applications.

 

Portfolio Landlord Applications: Remortgage Like-for-Like ONLY

 

Rental Cover Calculations:

Purchase and Remortgage Additional Borrowing:

Basic Rate Tax payer:  125% @ 5.5% (4.5% for 5 year product)

Higher Rate Tax payer:  145% @ 5.5% (4.5% for 5 year product)

*letting agents costs will be deducted from rental income for assessment (this will be requested on the calculator)

 

Remortgage Like-for-Like:

Basic Rate Tax payer:  125% @ 4.5% (on all products)

Higher Rate Tax payer:  135% @ 4.5% (on all products)

 

Please use the calculator to get an indication on the available lend

 

**The following below criteria only applies to Small Landlords and Like-for-Like Remortgages.

 

Max Age 80:

Maximum age of 80 for end of term irrespective of retirement age.

 

No Income proof required on submission:

No Income evidenced required on submission of application. May be requested by underwriting, if required.

 

No max Loan-to-Income (LTI):

With lending based on Rental income only, LTI limits have been removed.

 

No Top-Slicing:

To be able to simplify our proposition for Small landlords and Like-for-Like applications, we have removed the top-slicing ability for these types of application.

Portfolio landlords and first time buyer Buy to Lets

Portfolio landlord:

Those with four or more buy-to-let or consent-to-let mortgaged properties on completion of this application, excluding limited company buy-to-lets

 

Eligibility and Application Types:

Portfolio Landlord Application: Purchase and Remortgage with Additional Borrowing

 

First-time buyer First-time Landlord / Non-owner Occupier Applications: Purchase, Remortgage Like-for-Like and Remortgage with additional borrowing (Small or Portfolio Landlords)

 

ICR Calculations:

135% @ 5.5% (4.5% for 5 year products)

Please note the client’s income will be used towards affordability, supplementing the total available lend, whilst factoring in commitments and residential mortgages.

Please use the calculator to get an indication on the available lend

 

**The following below criteria only applies to Portfolio Landlords & First-Time Buyer BTLs.

 

Max Age 80:

Maximum age of 80 for end of term, providing the mortgage term finishes before client’s expected retirement age.

I.e. if expected retirement age of applicant is 75, the mortgage term cannot exceed the client’s 75th birthday.

 

Income Proof required:

Income evidence will be required on submission as part of standard packaging requirements.

 

Income used towards affordability calculation:

Customer's income will be used towards affordability, supplementing the total available lend, whilst factoring in commitments, residential mortgages and background portfolio.

 

Max Loan-To-Income (LTI) :

For First-Time buyer / Non-owner occupier applications: 4.95x client’s income (excluding any rental income)

 

For Portfolio Landlord applications:  4.99x client’s income (including gross rental of subject property and portfolio)

Packaging Requirements

For applications that pass on the small landlords and like-for-like remortgage calculator:

No income evidence or bank statements required on submission. 

Brokers are still expected to keep a record of these as they may be requested as part of a review at a later date.

 

For applications that pass on the portfolio landlord and first time buyer Buy to Let calculator:

Full standard packaging requirments are needed.

For more information, please view our Packaging Guide.

 

 

 

Valuations

Physical Valuation Required:

A Physical valuation will be required on all BTL applications

 

Rental income based on Market value:

Rental income for the application will be based on the market rental as indicated on the valuation report.

 

Valuation service:

Valuation service used to assess rental demand and rental income for all other properties being let, with the results used to validate an applicant’s portfolio.

Procuration Fees

DA Firms – 45bps gross

AR Firms – 45bps gross

 

Min £250

Max £10,000

FAQS

I have a customer who earns £200,000 per year. The ICR doesn’t provide the loan amount requested. Can they use the income to top up affordability, so they can borrow the full amount required?

No, as no affordability checks are done now for Small Landlords, only rental income alone can be used to assess the application. The new calculation for Small Landlords will mean that we will be able to help more customers than previously.

 

Do I use last year’s tax banding or this year’?

The key question is ‘What Tax Band will you be in upon the completion of this mortgage’.

 

Do I still need to request evidence of rental income within the last 31 days for any transaction?

No, this will not be required for any transaction for a Small Landlord, however you should be aware that the underwriter may ask for additional information to assess the application.

 

What’s the definition of a like for like BTL re-mortgage?

The definition of like for like re-mortgage is ‘keeping the balance the same as they have now’.  As long as the broker applies for the same balance as they have now, the term and repayment method can change, and it would still be classed as Like for Like.

This definition for Like for Like re-mortgage is applicable for Buy to Let applications only. A Buy to Let customer will fall under like for like, regardless of landlord status.

 

HMRC have multiple tax bands, why are we just using two?

We don’t want to over complicate things and there would be no difference in the lend outcomes. For example, between a Basic rate taxpayer and someone who pays no tax at all would get the same potential max lend. And there would be no difference between a Higher Rate Taxpayer and an Additional Tax Rate payer.

 

I have one customer that is a lower rate taxpayer and one that is a higher rate taxpayer. Which do tax band should they use?

In this scenario, always select the highest rate of tax applicable.

 

If I have a joint application, one customer is a small landlord and the other is a portfolio landlord, which calculator should I use?

Please use the portfolio landlord calculator

 

Why am I collecting my customers income and debt within the Mortgage Application, if no affordability assessment is being done and they are not sending in the documents?

Although we don’t require evidence of income and bank statements for small landlords, we’re still required to complete credit checks and keep accurate records

 

What product term do I select on your website if the rate is not changing as part of the application? (E.g. the customer is porting an existing rate)

If the existing product has 5 years or more remaining on a fixed product, then the “5 years or more” option should be selected. Otherwise for all other products (including variable rates) you should select the “Less than 5 years” option.

 

Will background checks still be required for my customers Portfolio landlord applications?

Yes these checks will still apply to Portfolio landlord cases along with business as usual income verification requirements for these applications.

 

Do I include Letting Agent fees when calculating a Like for Like re-mortgage lend amount?

No. This is not used in the calculation for like for like re-mortgages and will not be captured on the calculator for like for like re-mortgages.

 

How do I calculate my customers tax band?

NWIS cannot give guidance on a customers tax status. Therefore discuss and agree this with your customer and if they are unsure, they should contact HMRC for guidance 

 

 

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