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Can't remortgage because of lender's Affordability Calculations

Started by JPCoetzee, December 30, 2022, 10:03:08 AM

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We have a £300k mortgage on a house worth about £550k (i.e. 55% LTV). We need to remortgage and the lenders Affordability Calculations (see link) want to see over £2100 going in BEFORE they will give us a mortgage. The going rental rate for the property is £1600-£1700 pm and the current rental is £1500 pm.

Through no fault of our own there's no way we can make these finances work. It looks like we have to sell.

Are other landlords finding themselves in this situation?

(Apologies if this has been done to death here, I searched but couldn't find anything specific)

many thanks


My own - personal - heuristic has been that each £100,000 of property value brings in around £500 of rent... so your rent seems low, or the value is high. Whatever it is... it's waaay outside my own heuristic. And my heuristic is closer to the Lender's figures... £500,000 value = £2,500 rent. Strange times.

Try a Broker rather than a Lender direct... they may be able to finagle something more appealing. Additionally, you don't provide any details as to why you need to remortgage. If you're coming to the end of a fixed term and are about to fall onto the Lender's SVR, not good... if the same Lender won't get you onto one of their own fixed products then that's a trap we've all heard of. A Broker might enable you to take your business elsewhere.

Simon Pambin

To be honest I can see their point: on a £300k mortgage at, say, 5% you're going to need to be generating £1,250 a month just to cover the interest. Even if you've got a rock solid tenant and no other outgoings, by the time the tax man's had his share you're going to be losing money. Are you sure the going rate for a £550k property in the area is still only £1,700?

I imagine this is going to be a problem for a lot of highly-geared properties that only worked when interest rates were low. In theory, that should result in a fall in the available rental stock, which should push rents up, which should eventually restore equilibrium. In practice, I reckon it's going to get messy.


You don't give much background information,so it is hard to answer.If I am right in assuming that you took an interest only mortgage which is about to mature,then you need to take swift action.If you have a tenant, you would  first need to serve notice asap.Trying to sell with one in situ is very hard.If the place is vacant you might just be lucky enough to complete before CGT changes.This would appear to have been a very poor choice as an investment project.Maths is not my forte,but if I am right your returns have been around 2%,maybe less? No way is that enough to make the effort worthwhile.You would not have had much leeway to cover repairs,voids etc.House prices are falling in some areas,so time to cut your losses and get out I would say.
If you found someone to lend to you on these figures,I would run a mile.