Background properties owned by the applicant
Properties that are not rented out
The existing mortgage payment must be keyed as a credit commitment and will be included in the affordability calculation.
It is also essential that the associated running costs from background properties that are not rented out (e.g. second home applications with a residential property in the background or residential application with a second home in the background) are considered in the affordability calculation. To ensure this, associated running costs should be keyed as 'Second Home Running Costs' in Household Expenditure - see Affordability - other costs.
Existing property to be rented out
- The mortgage property must be keyed into the 'Existing mortgages' screen.
- Customer type must be "borrower with other lender" to enable the new mortgage to be keyed
- If you select 'Yes' to 'Is the property let?', this will allow you to enter monthly rental income.
- If confirmation is required we would request a letter from the letting agent confirming the expected rental income.
- We will also accept a valuation dated in the last 6 months.
Other Buy-to-Let mortgaged properties owned
Other let properties must be keyed individually in the 'Existing mortgages' section. If you select 'Yes' to 'Is the property let?', this will allow you to enter monthly rental income for each individual property. If confirmation is required we would request one of the following:
- A letter, statement or invoice from the letting agent confirming the rental income.
- Latest 3 months’ consecutive bank statements showing rental income.
- Tenancy agreement (current agreement required, not to be out of date/expired).
- Letter from accountant or solicitor
In order for background BTL properties to be considered as self-funding, 69% of the total rental income will be calculated and must be greater than the total monthly payments of all background BTL mortgaged properties based on interest only at a stressed rate of interest of 5.5%. For example: If a customer has three background BTL mortgage properties, with combined mortgage balances of £235,000 (all remaining outstanding at completion) total rental income must be greater than £1560.99 per month. i.e. (£235,000 x 5.5% / 12) / 69%.
- Any deficit will be deducted as a commitment within the affordability calculation.
- 60% of any surplus will be included in the affordability calculation.
Mortgage Free Properties
Where a customer has BTL properties with no mortgage commitment outstanding, the rental income can be used in affordability calculations if:
- The customer is declaring the income to the Inland Revenue and can evidence the rental income received by way of their Tax Calculations with corresponding Tax Year Overviews or an Accountants reference.
- Self employed criteria being met i.e. two years' rental income figures being obtained and verified.
If this applies the rental income should be treated as self employed income.
Where an applicant is self employed and their income is solely derived from property letting, please contact TSB for guidance before submitting the application.