Lender’s Rule Change Ratchets Up Expat Buy To Let Borrowing

Lisa Smith, BA (Hons), CeFA

Expat borrowers can borrow more to buy a home to rent out in the UK thanks to a relaxation of lending rules.

Skipton International, one of the country’s leading buy to let lenders, has announced a change in underwriting that can give bigger loans by adjusting the rental yield calculation.

The calculation is based on a test called rent cover.

The standard calculation for UK buy to let lenders is to use a rent cover percentage between 125% and 140%.

For a rent cover of 125%, that typically means the rent paid by tenants must come to 25% more than the interest only mortgage repayment charged at a rate of 5.99%.

How rent cover works

The lender says for a buy to let home valued at £1 million, generating a £2,400 a month gross rent, the maximum borrowing at 125% would be £616,000.

Under the calculation change, the rent cover percentage drops to 110%, increasing the borrowing for the same property to £700,000 – an increase of £84,000.

To qualify for enhanced lending, the expat borrower’s sole income or the main earner for joint applications, must be £100,000 a year or more and the loan must be at least £500,000.

Other lending tests apply, including borrowing should come to no more than 75% of a property’s value, making the maximum cost of a buy to let home £666,000.

Current deals are a three-year tracker from 3.24% (4.8% APR) or a five year fix at 3.74% (4.7% APR) for remortgages or 3.24% (4.8% APR) for purchases.

Strong demand from expats

Lender fees are £1,199 for purchases and £999 for remortgages.

Roger Hughes, Skipton International’s Business Development Manager, said: “We are always looking at opportunities to develop our mortgage proposition and make it more attractive. This change will allow high net worth individuals to borrow more funds to either purchase a new property or remortgage an existing one.”

Skipton International is a leading expat buy to let lender for borrowers seeking to buy or remortgage homes across England, mainland Scotland and Wales.

“Demand from overseas residents for UK Buy To Let mortgages is very strong, despite the ongoing Brexit uncertainty,” said Hughes.

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