Buy-to-let mortgage applications are being rejected because surveyors are down valuing the rental income on a property, and therefore advise lenders wrongly.
In some instances, surveyors even down value the rent that is already being received on a property.
The Sunday Times have reported on the issue, saying that some mortgage lenders are refusing landlords’ estimated rental income.1
The majority of lenders wish to see monthly mortgage repayments covered by rent with a 25% excess, which would cover expenditure and void periods. Some lenders require 130% of rental cover, whereas other are confident with 100%.
By down valuing the rent, the lender could outright reject the application, or could cap the amount they will lend to well under the investor’s hopes.
Andrew Montlake, from brokers Coreco, says: “We have seen a shift in the way lenders approach the question of rental expectations.
“Valuers have much more power in determining what is a fair market rent.
“In one recent case, a lender rejected our mortgage application because a valuer down valued the market rent for a property, even though the landlord had a tenant paying the rent provided on the mortgage application.”1
Aaron Strutt, another broker of Trinity Financial, advises landlords to provide the lender with evidence of other rental incomes or valuations locally.
Strutt says: “However, one of our clients provided 12 comparable rental incomes and we still couldn’t get the decision changed.”1
However, Mortgages for Business’ David Whittaker, says that landlords should be realistic. He says: “A landlord’s expectation of rent could rightly be based on the best for the area, while surveyors are more likely to look at the rents being charged.”1
LSL Property Services have found that rents are falling, however, very slightly, at just 0.1% in February. Rents are still higher than a year ago. The largest drops in rent have been seen in central London.1