Barclays has loosened its buy-to-let lending criteria by allowing applicants to use disposable income to cover any shortfall in its rental cover calculation.
The lender uses a rate of 5.79 per cent to assess affordability, as opposed to the mortgage rate itself. For example, a £100,000 loan on a 3.29 per cent fixed rate would require a rental income of £603 a month to cover the mortgage (£100,000 x by 125 per cent x 5.79 per cent / 12).
From today, applicants may use their own disposable income to guarantee any shortfall in that calculation, while previously they were required to provide evidence that the rent would cover it.
TBMC chief executive Andy Young says: “This is a sensible approach to adopt because as with any lending decision, you should always take into account the borrower’s financial circumstances.
“That may come from different sources and I think this is a far more sensible way to underwrite buy-to-let purchases. I’d like to think other banks will follow suit.”
Barclays managing director of mortgages Andy Gray says: “There are only a handful lenders that allow any shortfall in the rental income used to calculate affordability to be met by the applicant’s disposable income. Barclays’ new policy provides a greater opportunity for those planning for their financial future and choosing to invest in rental properties to help support their longer term goals of, for example, paying for their children’s’ university fees or enhancing their lifestyle in retirement.”