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Residential

Lenders will generally require the rental income to cover between 100% & 125% of the Investment Loan payments if the mortgage is paid at an interest rate of 5.5%. To determine how much, you could borrow you take the annual rental amount, divide it by 5.5% then divide the answer by 100% / 125%. For example, with an annual rental income of £22,000 your calculation would be (£22,000 / 5.5%) / 125% = £320,000 (where the lender is looking for 125% Cover). Some Lenders will sensitize the annual rent to allow for voids and costs.

Investing through a limited company (SPV)

If you are considering investing through a limited company (SPV), you might be under the impression that there is a minimum term a company must be trading. However, there is no such requirement. In truth, you can get a mortgage arranged before setting up an SPV. A certificate of incorporation will be required before the mortgage can be completed.

You, as director, are the lender’s primary focus. They will b