New BTL affordability rules

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    New BTL affordability rules

    I have fallen foul of the new affordability rules.
    My interest only BTL mortgages were coming to the end of their term. (For some reason the mortgage term was set at my husbands retirement age of 65). The mortgages are in my name only. I am with Birmingham Midshires but I knew that they usually extend the term of the mortgage so I didn't think it would be a huge problem to extend as I am 52.
    However, it was a problem and the people I spoke to at Birmingham Midshires were actually quite nasty.
    I will make the story as short as possible. First they refused to extend the term but they would give me 1 year to sell the property. They said I had broken the terms of the contract because I did not have the funds ready in the bank to pay of the mortgages.
    They then said they would extend the term if I made the mortgage a repayment (which I did not want to do). I had to fill out an affordability form.
    They concluded I could not afford the mortgage. Therefore they could not give me a repayment mortgage (good!).
    The third person I spoke to then agreed to extend on the same terms but for only 5 years, which I know is going to pass very quickly.
    My question is this: I thought the FCA said that the affordability rules should not be applied to people who wanted to remortgage. Does anyone know anything about this?

    My other question is about how the affordability rules work. When I took out the mortgages I was not working and did not have another income. (BM criteria at the time did not require a salary from another source.) However I do remember we had to give bank statements from all our accounts so they obviously looked at my husbands income.

    When I filled out the affordability paperwork I was told I could not include any of his income. But I had to include 100% of all the household expenses, and 100% of expenses for my 2 children. They said, I had to imagine a scenario that my husband had either died or left me! This is why I failed the affordability test.
    Were they correct to do this. They looked at my husbands income when I took out the mortgages (and the term end was at his retirement age of 65) but they say I can not include it now.

    I have posed this question on the RLA site with the legal team but did not get an answer.
    I have 5 properties but only 2 are mortgaged.
    The mortgages exceed the stress tests.

    Good post and worthy of a serious response.

    Whilst there is no justification in any lender acting in a hostile manner when a long standing borrower is seeking genuine advice the unfortunate fact is that irrespective of whether the loan(s) relate to Regulated or Buy to Let Mortgages a lender is entitled to have its loan repaid either from its sale or the utilisation of personal savings OR if one can afford it to arrange a Remortgage to secure a longer term mortgage facility. This scenario is playing out with many borrowers who have had Interest Only Mortgages on their primary residence without any support repayment vehicle in place to allow the for the capital to be repaid and the egg timer is running out.

    When an extension is sought from an existing lender or indeed a new lender , there is a term used in assessing affordability and that is called “Reasonableness or Plausibility ”. I.e What is the net income of the borrower/applicant and what liabilities are they subject to, credit cards, possible liability etc on a mortgage since clearly they need to be satisfied that once these commitments are discharged there is adequate monies to cover the mortgage payments in the unfortunate event of rental voids being experienced or having to pay for significant property repairs. Where it is considered that it is a high risk proposition then they do have the right to decline to assist.

    My recommendation is that you seek assistance from a qualified mortgage broker, they will establish how best to advise you and assuage your concerns over having to possibly sell your properties. There are numerous lenders who, subject to meeting their individual underwriting requirements can grant Buy to Let loans up to a borrowers 85th birthday and in a minority of instances beyond that point. Some lenders have a minimum Gross Income requirement of £25000 and some have no minimum but again both types of lender will ask for Income and Expenditure to be declared together with supporting Tax Returns showing the declaration of income from Land & Property for at least the last two years.

    Dont panic , there is normally a solution to such matters but you might find the costs of borrowing to Remortgage to be much higher than you perhaps have been paying with BM Solutions.


      How did you speak to BM about a product transfer?
      My understanding was they only deal through an intermediary.


        Good morning Boletus , I suspect it wasn't a product transfer but the coming to the end of its actual mortgage term. I had to read the post twice before I made my response.


          Good Morning Loanarranger.

          Birmingham Midshires no longer offers mortgage products direct to customers. This includes servicing existing customers with product transfers, further advances and mainstream mortgages. To find out more about the products we offer through the intermediary channel please contact an independent financial adviser.


            Thank you for your responses. I was beginning to think no one wanted to respond!

            Originally posted by loanarranger View Post
            When an extension is sought from an existing lender or indeed a new lender , there is a term used in assessing affordability and that is called “Reasonableness or Plausibility ”
            So is it reasonable to assume that my husband will leave me or die. I thought this was harsh considering they looked at our family income when I took out the mortgages and for some reason the mortgage end date was set to my husbands 65th birthday. I find that very strange.
            The crazy thing is I can afford it and have had no problems for the past 18 years, 15 of those years with BM.

            But regardless of whether that was fair we are having a shift of financials. I have no debts anymore and our personal mortgage should be paid of within a year. We are throwing money at our BTL this year to make it look good and increasing the rents. We then aim to have 2 years with maximum profits & minimum expenditure. My children will be adults so I will not have to include them on any affordability data. I then intend to look for a re-mortgage but I would prefer a long extension with BM.
            You are correct in saying I have a good rate and yes would like to stay with BM.

            But if there is anything else you can suggest that would be great. I guess I am looking for someone to say that BM could not apply the affordability rules to me because I was already a customer.

            I did have a bad day at the time and a lot of panic but I am over it now as they did extend for 5 years.

            I am also surprised that the question has not srisen before because surely I can't be the only one in this situation.

            I would also like to know what figures they would find acceptable.

            I did speak to brokers at RLA but they could not help at the time.

            Hi boletus - BM will still speak to people. I know my parents had easily extended their mortgage the year before to my fathers 75th. This lead me to believe I would not have a problem. But maybe it was because the mortgage term was coming to an end. BM did say I should have rung earlier and not have waited 3 months before the end of the term. I did have my reasons.


              Originally posted by slooky View Post
              So is it reasonable to assume that my husband will leave me or die.
              Sorry but it does seem a bit reasonable. There are obvious tax advantages to holding them in joint names but you have chosen not to.
              BM just want to be sure of their money with someone who has an income.

              Hi boletus - BM will still speak to people.
              That is interesting. When I tried phoning them, I went through the options and got to "are you a broker or customer?", when I answered customer, they said "speak to a broker, goodbye".
              Could you tell me which telephone number you used as they wouldn't speak to me and I'd very much like to speak to them direct.
              Last edited by boletus; 15-09-2018, 15:09 PM. Reason: spelling


                Hi Boletus
                I will not be home for another week I will look up the number and let you know.

                The mortgages are in my name because we were advised by our broker and the solicitors who did the leases at the time that that was the only way to get the mortgages. We also had to set up a management company. Cost us a fortune. Was never happy about it at the time.


                  Originally posted by slooky View Post

                  So is it reasonable to assume that my husband will leave me or die.
                  Just had a thought...

                  You say it is reasonable to assume the above but in that case any "what if" principle should be applied.

                  What if someone had an accident or fell ill and couldn't work and pay their mortgage. If that "what if" was applied, no-one would be allowed to have a mortgage.


                    Hi Slooky
                    i think you put your finger on the issue that you didn’t have any problems in getting the Mortgages 18 plus years ago. Those were the Wild West days of Buy to Let with very few lenders fully understanding the implications of Buy to Let Mortgages. BM were like many lenders like Mortgage Express where if you had a heart beat your application was invariably accepted with little or no documentation being required. Things changed dramatically after the Credit Crunch with various lenders falling foul of their loose lending and BM restricting lending to a maximum of 3 properties. Today their criteria is much more challenging and are no longer considered a soft touch in gaining a BtL Mortgage.
                    I couldn’t help but chuckle at the lack of response from the RLA broker but I will say no more.
                    i am glad that you have got an extension from BM but it would be best if 3/6 months before this extension expires you seek independent advice if you are seeking to retain the properties.
                    Best of luck in the future.


                      The new rules are extremely strict. I am having to sell my flat and now have the problem of an ignorant tenant due to these rules. They are basing calculations on me having to pay the mortgage with no consideration of rental income.


                        Propertygoesup- Sorry to hear that. I am absolutely positive that the FSA or the FCA said that the affordability rules shouldn't be applied to existing customers who quite clearly have had no problems paying their mortgages but at some time or other in the future would need to remortgage. They said that even if other lenders refused to lend, the existing lender should if the customer had no financial problems.
                        If these mortgage companys were so wrong back in the "wild west days" I look forward to some kind of compensation in the future for letting me have a mortgage while I was too stupid to realise what I was doing!!
                        Shame I was too intelligent at another point in my life and cancelled the PPI they tried to get me to pay.
                        By the way, BM does take into account my other rental income so that was a positive. I know when we were looking to mortgage our home a lot of lenders would not include rental income. It absolutely made no sense to me as my rental income comes from 5 different sources so it's highly unlikely that all 5 of them would cease.


                          Do not confuse the FCA guidelines on a Regulated Home loan and a Non Regulated Buy to Let, the guidelines for the latter are not covered and any claims against the lender would be futile. You exercised a “commercial” transaction.


                            Sorry I was being flippant I don't expect to make a claim.
                            I did not know that it didn't apply to BLT mortgages that's a disappointment.
                            Why did BM ask for copies of my husbands bank statements from his personal account and his business account as well as mine when I took out the mortgages?


                              Originally posted by slooky View Post
                              You say it is reasonable to assume the above but in that case any "what if" principle should be applied.
                              Why "should" it? It is up to individual lenders to decide what level of risk they choose to lend to.
                              BM have decided that borrowers without any earned income* or pension income are a higher risk for them.

                              I am absolutely positive that the FSA or the FCA said that the affordability rules shouldn't be applied
                              It doesn't say that, lenders don't have to further lend to existing borrowers.
                              It only says the PRA expectations do not apply to existing borrowers (their words).
                              There is no "should" about it, only "if they want to".

                              Why did BM ask for copies of my husbands bank statements from his personal account and his business account as well as mine when I took out the mortgages?
                              Perhaps because your PPR was held in joint names? If they've got a secure earner paying off a mortgage on a property with a big chunk of equity, it is a pretty safe bet. Or maybe you were a borderline case even in the Wild West days and a decently paid husband supporting you was enough to tip the balance.

                              A couple of further points that might be a bit more helpful;
                              Speak to an independent mortgage broker, TMW for instance do not require an earned income or pension.
                              Also take some proper advice about putting the properties into joint names, it is quite easy to do.

                              *Earned income is the term BM use to distinguish between rental income but any self managing landlord knows rental income can be damned hard earned.
                              Last edited by boletus; 16-09-2018, 10:05 AM. Reason: spelling


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