I pass this on to my investor clients so they can very quickly assess the max. BTL mortgage achievable on a known monthly rental. It is not rocket science just as few button presses as poss. I thought it would be useful. Call me if you need clarification -

To work out how much you can borrow on an interest only BTL loan if you know the monthly rental being achieved by a property.

Then you just need to know
A. Interest rate % of the proposed mortgage (e.g. 5.59%)
and
B. Rental cover needed by lender
(e.g. 125% of monthly mortgage for Mortgage Express)

So for your example where you achieve £500 pcm rental and the interest is 5.59% (if we use 125% rental cover) then -

• The monthly allowance the mortgage co. allow in the calculation in this case is 1 divided by 125% rental cover = 0.8
[1 / 125 %]

£500 per month rent x 0.8 = £400 per month rental mortgage allowance

• So if you have an allowance of £400 pcm (x 12 = £4,800 per year.)

Then all you need to do is divide this annual ‘allowance’ by the interest rate of the proposed loan e.g. 5.59% (You need a calculator with a % button)

£4,800 divided by 5.59% = £85,867 is how much they will lend.
(Provided it does not exceed their maximum stated LTV e.g.85%)
[4800 / 5.59 %]

This is normally the actual amount they will lend as they usually allow arrangement fees to be added on top (even over and above the stated LTV maximum of 85% or 90%)

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If the rental cover required by the mortgage co. was 110% of pay rate then

£500 per month rent x 0.91 = £455 per month mortgage allowance
(1 divided by 110% rental cover = 0.91)

So if you are paying £455 per month x 12 = £5,460 per year.
Divided by 5.59% interest rate = £97,674 loan on offer.

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The blue text is the calculator button press.

Call me if it does not compute.

Dave Smith CeMAP CeRER
Spring Financial Solutions
M. 07973 501058
T. 0845 6431755
davesmith@springfs.co.uk
www.springfs.co.uk

I note that some folks have difficulty with percentages. Percent literally means "per hundred" from Latin "centum".

So 5.59 percent is 5.59 per hundred. The per can be replaced by the divide sign (5.59 out of one hundred). or 5.59/100 or 0.059.

If people can just think what the word means, they will never again need a "% button".

BTW, I recently had this conversation with my 16 year old son about to take GCSE maths and his 18 year old friend. I offered his friend a 5% commission to sell a car for £2,000 and neither of them could work out that he'd get £100. At over 8 grand a year for private education, I sometimes despair.

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Hi Dave,

Very many thanks for sharing this tool. However, may we ask that you kindly update it for those of us that are just starting out :-)

Also, hope you don't mind, we have PMed you with a deal that we are looking at, showing our implementation of your tool. We would appreciate any feedback.

__________________
Lawrence & Chinelo Onunekwu
Tricord Properties
Mobile: 07804 147 663
Email: admin@tricordproperties.com
Looking for BMV property in Woking, Guildford and Portsmouth

Or you can download the BMV calculator here:

Below Market Value Properties From BMV Club - BMV Club Home


Just fill in the latest interest rates and it will automatically give you the maximum loan that a company will give you. That way you do not have to phone your mortgage consultant every time you 'think' you may have a deal. Just phone when this tool tells you that the deal will definitely work.

You can even customise this tool to your heart's content as it is programmed in Excel.

And it is FREE



Regards
Pankaj

Lol!!!

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