Using Rental Income For A Mortgage
NatWest has announced this morning that they will be simplifying their criteria for using earned rental income for a mortgage application, for residential purposes. Most mortgage lenders will use earned income from employment and self employment as a means to determine exactly how much mortgage you are eligible to borrow. For example, most mortgage lenders will allow you to borrow between 4.49X and 5.5X your income as a mortgage, subject to lender criteria and credit commitments. For a lot of seasoned property owners with income streams coming from investment properties (buy-to-lets), this extra income can really mean the difference between being able to get the mortgage amount you need….and falling short! In this article we will go over the news announced by NatWest, and how this change might help borrowers.
Using Rental Income For A Mortgage Application
In more or less all circumstances and with more or less all UK mortgage lenders, income earned from rental land and property will be treated as self-employed income. Whether you own a limited company and pay yourself through the company, or whether you are a sole trader, this does not make a difference. You will be considered a self employed income earner for the money you receive from your investment property. Different mortgage lenders have different ways of calculating and using self employed income for the purpose of mortgage applications. Most lenders will take an average of the last three years net profit as a total income. So, for example, if you earned £25,000 in 2022, £30,000 in 2023, and £35,000 in 2024, many lenders would list your income as £30,000.
With rental income, it is generally a similar thing however NatWest have announced that they have simplified their assessment of rental income and consideration for finance costs: For residential applications only, they’ll use the net amount from ‘Profit from UK Land and Property’ minus ‘finance costs’ (evidenced on SA302s / SA100s) using the lower of either an average of the last 2 years self-employed income or the latest year. So, in the case of the above example, they may be able to consider the income as £32,500 (average of last two years). However, if the latest year was less than £32,500 hypothetically, then they would always accept the lower figure. Whatever that may be.
Speak To A Mortgage Advisor About Using Rental Income For A Mortgage Application
Using rental income for a residential mortgage application can be tricky and at some times confusing, but really, as long as your income is increasing year on year from the property you rent out, with the help of a qualified and specialist mortgage advisor, you can really make the most of your income. Call or message our team of experts today to see how we can help you.
