Speaking at The Buy to Let Online Forum yesterday, McCullough, national sales manager, intermediary mortgage distribution, said lenders had become more forensic in their assessments of non-rental earnings to make sure there was spare cash to cover void periods.
Research carried out by BDRC BVA found that 1.7m renters expected to lose their jobs because of coronavirus. Furthermore, the National Resident Landlords Association found that 44 per cent of landlords had offered to help their tenants in some way, either by offering payment holidays, lowering or deferring rent.
Against this backdrop, lenders want to make sure landlords have a well thought through plan to continue paying their mortgage if the tenant is unable to do so, now and in the future.
McCullough said: “Lenders and brokers need to be very clear on landlords’ personal income circumstances. Lenders are going to start looking at this in more detail so if there is an apparent risk of voids people have sufficient income to plug those gaps and also mitigate circumstances that could affect them in the future. Lenders are looking closely at that so brokers should do that too.”
Lenders are also getting deeper into a landlord’s employment situation, said McCullough.
“The income might look strong but is the employment secure?”, he said. “Or what if they are self employed? Have they had to stop trading in their current line of work?”
In the past, if a landlord was experiencing voids, or they anticipated a period of time where the property was not going to be tenanted, lenders would ask for this to be covered off in the business plan. Lenders have now become stricter on this point, said McCullough, and want to see evidence to support their plan.
To help brokers, Aldermore has put together a ‘crib sheet’ so they can cover off the new requirements with their clients.
Business plans could now become commonplace for all landlords, not just portfolio investors, he added. Aldermore is asking all landlords to supply a portfolio schedule and a business plan when they apply for a mortgage.
Registration is now open for brokers who would like to access presentations and content from the Buy to Let Online Forum 2020, which took place yesterday.
The forum was Mortgage Solutions’ first online event, including live streamed speakers and attracted nearly 1,000 pre-registered attendees.
Anyone who missed out attending on the day can access resources and watch speakers for up to six months.