Landlord seeks generous rent to interest calculation to increase borrowing on low yielding flat

A full-time landlord with a large portfolio in South East London contacted for help in raising finance to use as a deposit on his next buy to let purchase.

He wanted to remortgage a one-bed flat in a converted townhouse which he owns personally, but as it only produces a small annual gross yield of 3.6% he needed a generous rent to interest (RTI) calculation to maximise the amount could borrow. Recently, many lenders have increased their standard RTI cover for personal borrowers from c.125% at 5% to c.145% at 5.5%, so we needed to find a provider that had not yet revised its policy.

Fortunately, for the client we were able to find a lender which is offering 125% at a pay rate of 3.67% up to 70% loan to value. This suited the client and he accepted the following terms on a lifetime tracker:

Property value: £470,000

Loan amount: £329,000

LTV: 70%

Rate: 3.67% loan term tracker (LIBOR + 3.09)

Term: 25 years

Borrower: Individual

Lender arrangement fee: 2% (£6,580)

Mortgage payment: £1,006 pcm

Rental income: £1,415 pcm

Gross yield: 3.6% pa

Consultant: Nick Helm

Consultant