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I'm in a pickle! I have become emotionally attached to my tenant. He's been a model tenant for about 10 years and i have a good relationship with him. He's never asked for anything and takes excellent care of the property, even making little improvements. I currently charge him £475 but a recent valuation recommends £550. I'm happy with the rent I receive at the moment and would love to retain my current tenant, he could easily move on. i'm coming up to a remortgage and told this rental amount may effect my stress tests. I know I'm running a business and I'm calculating losing this tenant may cost more in the long run. Has anyone been in the same situation? How would you approach raising the rent with his new tenancy agreement. Many Thanks. Rick

Sorry if this has been answered already, I couldn't find anything when I searched but perhaps I'm not searching correctly. Essentially, I'd like to know if the lender stress test of 145% is based on the gross rental income or net, i.e. before management fees and maintenance fees etc are deducted or after?

I own two buy to let properties plus my residential home. All have mortgages secured on them. I withdrew equity from one of the BTLs (Property 1) before the stricter rental cover tests came into force in 2017. I have been able to refinance since then but choice of lenders has been greatly reduced as many won't touch it due to the large size of the loan against the monthly rent. Property 1 has a value of £375k, outstanding mortgage £246k (LTV 66%), and monthly rent £1075. It is my former home and has seen good capital growth as it is in a prime residential area, but clearly it does not yield well! The second BTL property (Property 2) has a value of £320k, outstanding mortgage £170k (LTV 53%), and monthly rent £1200. The two existing BTLs are owned with my wife. We have so far not converted to a limited company as we have avoided the mortgage interest relief changes by making my wife, a basic rate taxpayer, entitled to the income. That is currently the plan for the new acquisitions too. I am looking to expand my portfolio and have a goal of buying another two BTL properties this year, with hopefully more to follow. I have enough cash saved to use for deposits and fees etc. on the two new BTLs. (I may also look at releasing equity from Property 2 to increase my investable funds.) We can assume that the two new BTLs will have significantly higher yields and wont struggle to satisfy lenders' stress tests when looked at in isolation. However, I have identified that the portfolio landlord rules may be a hurdle to my portfolio expansion plans as the low-yielding Property 1 is likely to skew the rental cover tests that lenders will run on my portfolio as a whole once I reach 4 properties. I would be grateful for any thoughts or advice on the following: 1. At what point do I become a portfolio landlord? I don't think my residential home counts towards the 4 properties, but I have heard that when you own three mortgaged BTLs and are in the process of applying for the fourth BTL mortgage, lenders will apply the portfolio landlord tests at that point. Is that right? 2. Is there a standard portfolio rental cover test which lenders are obliged to use? Or do the exact calculations vary by lender? I have seen 145% @ 5.5% interest rate mentioned a lot. Are some lenders more flexible than this? If not, I think Property 1 is going to be a large hurdle to my expansion plans. 3. Even if I could find a flexible lender who would lend on my portfolio including Property 1, will Property 1 always hold me back when I seek to expand my portfolio and refinance? After all, each time I make a new acquisition I will be potentially approaching a new lender each time - each one will have their own view on my portfolio based on their own criteria. I don't want availability of finance to be a constant struggle as I expand. Therefore, should I consider selling Property 1 and putting the equity of £129k-ish to work elsewhere? I'd rather not sell as I believe future capital growth prospects remain strong, but I am also keen to expand in the short term. 4. Would converting the existing BTLs and/or buying the new BTLs within a limited company help with availability of finance? I understand the portfolio stress tests may be more relaxed when it's a limited company borrower. Looking forward to your thoughts. Thanks Matt

Hi hubbers, I was hoping for a little bit of advice. My wife and I are currently looking to buy our 2nd BTL and we are not sure whether to buy in a Ltd company or not. We are both basic rate tax payers and can afford to buy in our personal names and not be pushed into the higher tax bracket providing we equalise our salaries (although we will be close to the 40 percent tax bracket). We are both 27 and I would like to think that in the next 3-5 years we would have had pay rises making us higher rate tax payers (myself more so as my wife is now working part-time). So my question is; Do we bite the bullet and invest through a Ltd Company even though the interest rates and costs are higher or do we invest in our personal names and buy all subsequent properties through a company? on a side note, our current strategy is to invest in areas that are likely to see high capital growth and then recycle that deposit when we remortgage. Is this a flawed strategy when buying in our personal names? My reasoning is that with the lending criteria stress test at 5.5% interest rate x 145% rental income - it now seems that lenders are more interested in achieving rents than the LTV? Because of this, would we need to buy in a LTD company (where the stress tests are more leniant) for our strategy to work? A very long winded question! If any of you can give any advice it would be very much appreciated! Thanks all! Adam

Do we need a new broker or Is this a common theme? The mortgage on our B2L was up for renewal before it reverted to the SVR. A good opportunity to release some funds at the same time to reinvest into another property. I thought! (Following well publicised strategies). Two agents valuations came out at £390K £400k The existing mortgage on the property is £185k For the first 3 years the Property achieved a monthly rental of £1250 no voids. New tenant moved in April this year with the rent agreed at £1375 All documented with a tenancy agreement and managed by an agent, separate bank account clearly showing the money in and out. We wanted a mortgage as close to 75% LTV as we could get i.e. borrow around £280k. To shorten the story, the stress testing applied by many lenders, TMW. BMS etc meant we could only achieve £206k. Thier valuer down played the rent and the value of the property. The broker recommended New Street who said they were prepared to get closer to the 75% LTV we were looking for and lend £260k providing we could send them our 2017 SA302 ( we had previously provided 2015 and 2016 SA302s). The interest rate was higher at 3.45 fixed for 5 years and the fee was heavy at £3500 but we felt over the long term it was worth it. We sent off the 2017 SA302s The tax overview and SA302 clearly show we are lower rate tax payers and therefore were taxed at 20% , this being one of the lenders stress test requirements. Because the level of income before adjustments/allowances showed we earn slightly above £45k a year the lender decided we are therefore higher rate tax payers and could only lend at 60% LTV. We pointed out that HMRC consider us lower rate tax payers as demonstrated by the SA302 and asked how can they dispute that? The lender ignores the tax calculation on the SA302 and instead Just looks at the break point of 45k as the level for higher rate tax payer. Frustrating Is the polite way to describe the last 4 weeks we are now on our original lenders SVR still looking for refinance. Would welcome any comment on any part of the process especially as it now seems the strategy of refinancing to go again is dead.