Virgin Money today announced improvements to there buy-to-let stress tests – the formula used to limit the maximum loan based on the rent a property can achieve.
Originally this was 5.5% at 145% for purchases.
Today it is 5.0% at 145% for purchases.
As an example on a rent of £500 Virgin capped the borrowing at £75,235 with the changes you can now borrow up to £82,758
Unfortunately, the lower Virgin Money rental stress tests are for Five Year Fixed Products only others stay at 5.5%.
Following in line with other mortgage lenders having lower rental stress tests for five-year fixes by using an exemption in the PRA rules.
How does this compare? Well a bit better.
Precise Mortgages for Basic Rate Taxpayers & Limited Companies on five-year fixes have a stress test rate of pay rate at 125%. The pay rate on a 5-year fix at Precise can be as low as 3.94%
As an example on rent of £500 precise limits the borrowing at £121,800 that is a full £39,000 more than Virgin Money.
When it comes to Buy-to-Let in low yield areas such as the South East, it can become paramount to talk to a specialist Buy-to-Let mortgage broker.
Otherwise, there could be almost £39k extra deposit you would need.