According to the FCA Handbook, a Buy-to-Let (BTL) credit agreement means either:

1. A contract that at the time it is entered into has the following characteristics:
   1. A lender provides credit to an individual or borrower
   2. The contract provides for the obligation of the borrower to repay to be secured by a mortgage on land in the EEA
   3. At least 40% of that land is used, or is intended to be used, as or in connection with a dwelling (or, where trustees are the borrower, by an individual who is a beneficiary of the trust or by a related person)
   4. Provides that the land secured by the mortgage is subject to the requirements in (2);

or

1. Is an MCD article 3(1)(b) credit agreement which provides that the land, or existing or projected building, to which it relates is subject to the requirements:
   1. Cannot at any time be occupied as a dwelling by the borrower or by a related person and
   2. Is to be occupied as a dwelling on the basis of a rental agreement

Following MCD changes, BTL can either be deemed as a Consumer Buy-to-Let (CBTL) or a professional BTL, with the key determining factor being whether the customer has ever lived in the property, is living in the property or plans to live in the property.

BTL products are non-regulated and are therefore subject to different product terms and affordability.

Please note that Buy-to-Let applications are subject to product availability and restrictions may apply.

• BTL lending is subject to specific BTL products and terms

• New applications for BTLs let to family/related persons will go through the same underwriting and affordability tests as a residential mortgage and will be based on affordability

• Applications for Let to buy will considered on potential rent which will be confirmed by the valuer

• Consumer Buy to lets will be reviewed based on ICR coverage

• The assessment for the rental income calculation (or Interest Coverage Ratio ‐ ICR) will be determined by the following;
  • For new applicants, where their income puts them into the higher rate tax bracket, the amount earned in rental income must cover at least 140% of the interest only mortgage payment
  • For new applicants, where their income puts them into the basic rate tax bracket, the amount earned in rental income must cover at least 125% of the interest only mortgage payment
  • For re‐mortgage customers, where there is no additional lending (regardless of whether their current mortgage is held with the Society or not), the rental income must cover at least 130%
• Maximum LTV is 80%
• Maximum mortgage term available 40 years
• Buy-to-Let mortgages can be considered on a repayment basis, interest only or part repayment / part interest only
• We will not accept an application from a portfolio landlord
  • Definition: A portfolio landlord is a landlord with four or more mortgaged Buy-to- Let properties across all lenders. This figure would also include the proposed mortgage being applied for with the Society

• Applicant(s) should ordinarily be existing owner occupiers (with or without a mortgage). Consideration will be given where an applicant does not own their own home, subject to the underwriter being satisfied with the underlying rationale
• Special Purpose Vehicle Companies are not allowed
• If the applicant(s) have other investment properties, the applicant(s) must complete the Society’s Personal Asset and Liability Statement
• Borrowers are restricted to a maximum portfolio with the Society of £1 million including main residence
• Borrowers who are married, in a civil partnership, co-habiting or have their financial affairs linked will have their borrowings with the Society classed as one total figure

The property must be let by way of Assured Shorthold Tenancy agreement. The maximum duration on the term of the tenancy is 36 months and the AST should be renewable at 12-monthly intervals. We will accept a maximum of 4 individuals (regardless of the relationship to each other) on the agreement and a maximum of 4 separate agreements for any one property (where individual rooms are let out).

The property must be:

• valued at more than £75,000
• located in England or Wales

We will not lend on the following properties:

• Properties not in a let-able condition at time of completion
• Properties converted into bed sits with shared kitchen and bathroom facilities
• No element of HMO (Housing in Multiple Occupation)

For professional BTL applications (not CBTL), the rental income calculation is used to determine affordability. The amount earned in rental income must cover at least 140% of the Interest Only mortgage payment, calculated in accordance with the following:

• For fixed rate products of 5 or more years duration – 5.5%
• For all other products - the higher of pay-rate plus 2% or 5.5%

Where the rental cover calculations are not met, the Society will consider lending where it can be adequately demonstrated that the strength of borrowers’ covenant is sufficient to create an acceptable lending risk. In order to demonstrate this, the following criteria will be met:

• The BTL mortgage must fall within multiples of 4.75 (income) for a sole application and 4.5 for a joint application, with the annualised payment for the background residential mortgage having first been deducted from gross income and
• The applicants must provide a budget planner and by using either this or ONS data, it must be clear that affordability exists for the background residential mortgage
• The Society will accept as income the net rental figure from existing BTLs, provided that this can be evidenced for at least the previous 12 months. Evidence will be required in the form of SA302s or company accounts
• The Society will carry out an assessment of the customer’s ability to cover rental voids, to ensure the customer can not only cover the void but also cover the required expenses associated with owning and maintaining a rental property.

Properties let on a multi-tenanted basis are acceptable, provided that:

• the property is occupied by no more than 4 tenants
• the property is not subject to Houses in Multiple Occupation licensing
• the property contains no more than four habitable storeys and no more than one kitchen