Income criteria
In this section we cover:
Interest Cover Ratio (ICR)
To reflect the different taxable income levels of applicants, we have a range of ICRs that are applicable dependant on the customer and/or application. The gross rental income, confirmed by the valuer, must cover the monthly mortgage interest payment by at least:
Limited Company HMO |
Company Buy to Let |
||
|---|---|---|---|
When calculating the maximum borrowing, this will include any product fees you want to add to the loan. If the product fee is being added to the loan, this can exceed the maximum LTV. But it can't exceed the maximum loan amount.
125% ICR applies to all Limited Company applications (except Houses in Multiple Occupation). And those in personal names where the following criteria is met:
- Applicants declare themselves to be Lower rate taxpayers and;
- Declaring their gross annual income is less than £50,271 per applicant, upon completion of the mortgage. This is less than £43,662 gross income in Scotland.
- Personal applicants can have no more than 3 rental properties (with or without a mortgage). This includes any The Mortgage Works applications in progress.
Of the existing buy to let income input at Decision in principle stage, we'll take into account the following in our assessment of an applicant’s overall income:
- 75% of all rental income. This includes existing and proposed buy to lets with The Mortgage Works.
- 100% of all other sources of income.
Read our 'Understanding affordability' page on how we calculate affordability and how much your client could borrow.
Additional ICR information
In order to ensure the correct ICR is applied to the application, you need to key 100% of all existing BTL income.
For purchase and Let to Buy applications we'll add 75% of the new property's proposed gross rental income to the applicants’ annual income.
For joint applications, we'll add half of the 75% proposed gross rental income to each applicants’ annual income.
We'll treat any applicant that has recently left employment, retired or started self-employment as a higher rate taxpayer.
View our Portfolio landlord criteria page to see the rental calculations and maximum LTVs for portfolio landlords.
Stress rates
To check affordability, we apply the following stress rates:
| Application type |
Trackers and variables |
Fixed for 1 or 2 years | Fixed for 5 or 10 years |
||||
|---|---|---|---|---|---|---|---|
| Purchase, Remortgage (with capital raising) and Further Advance |
Like for Like Remortgage (excluding Let to Buy) |
||||||
| Stress Rate | Higher of pay rate +2% or 5.50% |
Higher of pay rate or 4.50% |
|||||
* Please refer to our ICR section for more information on the ICR applicable on your application.
Pay rates
Check our product finder to find out what the pay rate is for your product.
Further advances
We'll continue to stress individual loan elements separately in line with the above. However, the Stress Rate applied to existing lending will be set to a minimum of the Stress Rate applicable to the new borrowing. Please download our further advance calculator for support calculating potential further borrowing.
Minimum income
There is no minimum personal income requirement. Proof of personal income may be requested to support an application. We'll use this with other information relating to the landlord and the property. This is to validate that the loan is going to be used for its intended purpose.
Non-portfolio applications
We'll carry out further underwriting. We may require additional proofs to support sustainability by requesting one or more of the following evidence:
- 3 months' bank statements
- Personal savings to support 6 months’ rental income
- Additional household income*
- Available household funds to act as a sinking fund.*
* We'll only consider household income/sinking fund where the third party is a spouse/ partner of the applicant. They'll need to hold a joint residential mortgage with them.
We may decline the application if we consider the exposure to be too high. For example, where they have a large residential mortgage solely owned. Or a large amount of unsecured debt not consistent with the household income.
Income proofs
We'll require income proofs for landlords using the 125% ICR. We may request proofs for applications with a 160% ICR or higher. For example if there are high levels of unsecured debt, Nationwide Group BTL exposure over £1million.
Income included in assessment:
- Gross earned income (employed/ self employed)
- Pension income
- Total gross rental income
Acceptable proof of income:
| Landlord Type | Income type | Proof |
|---|---|---|
| Experienced Landlord | Self employed | Tax calculation & Tax Year Overview |
| Employed/retired | ||
| First Time Landlord | Self employed | |
| Employed/retired | Latest payslip/pension statement | |
| No taxable income | 3 months bank statement |
In order to validate that all applicants are lower rate taxpayers and income meets the policy above, we'll require proof of income in the form of the latest SA302. The only acceptable SA302 should cover the years 2023/24. Or tax calculation and the accompanying tax year overview dated within 18 months of the date the proofs are uploaded.
Adverse Credit
Where there is adverse credit, we apply a range of factors to determine how we assess applications.
- In general we won't accept applicants who have had in the last six years:
- an Individual Voluntary Arrangement (IVA)
- a property subject to a previous repossession
- a County Court Judgement (CCJ) / Court Decree registered against them
- discharged bankruptcies (we'll consider after 6 years)
- We also won't consider lending to applicants with:
- a Bankruptcy Restriction Order or Bankruptcy restriction undertaking in place
- if applicants are in mortgage arrears. However, we can consider minor historic arrears by exception.
- current or previous defaults. However, we can consider strong applications by exception.