Existing customers who want to raise additional money from The Mortgage Works may face disappointment due to recent rental calculation criteria changes.
If you are an existing The Mortgage Works customer you will probably be shocked to find out that this juggernaut of the buy to let mortgage market has put the brakes on lending by hardening its rental coverage requirement from 125% to 145% coverage.
That’s right the Nationwide-owned firm announced last month it was increasing its rental yield cover over the mortgage payment by a massive 20 percentage points.
The explanation given has gravitas as they expect interest rates to rise and also the tax changes planned for April 2017 to put a strain on Landlords reserves and ability to ride out rental voids. It’s difficult to argue The Mortgage Works view but it has certainty sent out a shockwave through the buy to let world with Keystone Mortgages following suit already.
The Mortgage Work Rental Changes
So what do these changes really mean? For example: someone looking to get a £200,000 Buy to Let Mortgage from The Mortgage Works will need an extra rental yield of £166.33 per calendar month.
Table providing examples of the impact of Rental Calculation Change
| Loan | Monthly mortgage payment* | Current Rental Formula (125%) | New Rental Formula (145%) | Extra rent now needed pcm |
| £150,000 | £623.75 | £779.69 | £904.43 | £124.75 |
| £200,000 | £831.67 | £1,039.59 | £1,205.92 | £166.33 |
| £300,000 | £1247.50 | £1,559.38 | £2,261.10 | £249.50 |
| £500,000 | £2079.17 | £2,598.96 | £3,014.79 | £415.83 |
*Based on an interest only loan TMW at 4.99% (their standard stress tested rate).
If you are an existing The Mortgage Works customer left stranded by the rental change and are looking to raise money on any of your properties we have access to a number of lenders with more favorable rental calculation so please get in touch as we have access to the whole of the market and will try our best offer the right buy to let mortgage for you.
For more information about buy to let mortgages please complete the online enquiry form on this page alternatively call us on T: (020) 7993 2044.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines. To get in contact with him please click here.
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