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Coventry BS introduces tiered buy-to-let interest coverage ratios

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  • 22/05/2017
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Coventry BS introduces tiered buy-to-let interest coverage ratios
Coventry Building Society has introduced a 125% interest cover ratio (ICR) for lower rate tax payers.

The lender is also removing its requirements for minimum income (previously £25,000, or £30,000 for joint applications) – and minimum time in employment (previously 12 months).

The tiered ICR proposition for buy-to-let landlords, is based on applicants’ gross annual income and tax status.

It is:

  • If each applicant’s total gross annual income is less than £40,000 and all applicants are non-taxpayers or basic rate taxpayers, the ICR is 125%.
  • If any individual applicant’s total gross annual income is £40,000 or more, or if any applicant is a higher rate or additional rate tax payer, the ICR is 140%.

Coventry BS director of intermediaries Kevin Purvey said the changes were necessary as the buy-to-let market became more complex.

“We’ve listened to and worked with intermediaries, and we think that a tiered ICR calculation – as part of our overall assessment – is the best way to adapt to the changing market,” he said.

He added that these changes would allow the mutual to offer its buy to let products to a wider group of landlords.

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