Using the Calculator
You can use the below calculator to work out how much rent you need to have for a given mortgage sum, or how much mortgage you can achieve from a given monthly rent amount.
You will need to know the proposed mortgage interest calculation rate. This can usually be found on a lenders product guide if you have a particular lender in mind. Alternatively, unless your client is taking a 5-year fixed rates, most lenders will use a ‘notional’ rate of 5.5% to calculate the affordability.
You will then also need to know the ‘margin’ above the notional mortgage payment. Again this can be found on the lenders product guides. If you have not chosen a lender as yet, a typical lender will use 145% for applications from individuals and 125% for applications from Limited Companies
In addition to the rental calculation on the subject property, for a portfolio landlord (someone who has 4 or more mortgaged BTL properties) a lender may also have another calculation that they apply to the background portfolio as a whole. Some lenders offer a calculator on their website to help you with this. If you register with Connect for Intermediaries, we will send you a link to our ‘Broker Tool Box’ In this you will find a free portfolio spreadsheet you can use with your clients that calculates the stress test on the background portfolio for you.
Drop us a line, if you have any further questions.
Give us a brief outline of your client enquiry and we will come back to you quickly to let you know how we can help. If you would like to speak to us immediately, call us on 01708 676 123.