The Intermediary – September 2025 - Flipbook - Page 101
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How our blended
ICRs could help your
client achieve the
loan size they need
When I’m out and about on my travels I’m often asked how
brokers can maximise their clients’ borrowing potential.
I always tell them they need to set up a case in a way that’s
advantageous to their clients.
So, how do you go about doing that? Let me explain how.
One of the more nuanced areas of buy-to-let is how lenders
assess affordability, particularly when it comes to the interest
coverage ratio (ICR).
Typically, lenders will apply a standard ICR of between 125%
and 140%* for personal ownership applications, depending on
factors such as income tax liabilities and ownership structures.
Basic rate taxpayers are usually assessed at 125% ICR and
higher rate taxpayers at 140% ICR, while the ICR for additional
rate taxpayers varies from lender to lender. The ICR can also
vary depending on the property type, with HMOs and MUFBs
often stressed higher than single dwelling properties.
But what happens when one of the applicants is a basic rate
taxpayer and the other a higher or additional rate taxpayer?
Many lenders will default to the higher ICR meaning the
rental income must cover a higher proportion of the mortgage
payment, potentially leading to a lower loan amount.
How we could help
At CHL Mortgages for Intermediaries, we understand the
complexity of individual circumstances. As an experienced specialist
lender, we’ll consider a blended approach to ICR affordability for
borrowers who have different tax bands and shares of ownership
or rental income, helping them achieve a larger loan amount.
Mrs Green
Mr Green
£65k pa
£45k pa
Higher rate
taxpayer
Basic rate
taxpayer
Mr and Mrs Green have recently inherited a large sum
of money. They’ve decided to invest in property.
They’d like to purchase a three-bed property on the
market for £290,000 with an estimated rental yield
of £1,200 per month.
They’re looking for a 5 year mortgage at 75% LTV.
However, with Mrs Green being a higher rate taxpayer,
most lenders are applying an ICR of 140%, meaning
they can only borrow £206,956 – well below the
£217,500 they need to purchase at 75% LTV, leaving them
to stump up a larger deposit or find a cheaper property.
Fortunately, we can offer blended ICRs, calculating
borrowing based on the average ICR of all applicants. With
a blended approach, we’d apply an ICR of 132.5% meaning
Mr and Mrs Green could now borrow up to £218,670 with
us, an increase of almost £12,000, meaning they can now
achieve the loan amount required.
What’s more, if Mr and Mrs Green considered shifting
ownership structure from joint tenants to tenants in
common with Mr Green holding 99% property share,
we can offer an even more favourable blended ICR of
125.15%, meaning maximum borrowing rises to £231,513,
that’s an increase of over £24,000.
With the increased loan size using our blended ICR and a
change to tenants in common, Mr and Mrs Green can
now not only afford the original three-bed property,
they could even afford a more expensive four-bed
property with a higher yield.
As always, landlords should seek professional tax advice when considering restructuring property holdings and make
sure they declare it appropriately to HMRC, but helping your clients understand the advantages of blended ICRs
and the different ownership structures can make a massive difference to investment strategies.
Roger Morris
Group Distribution Director
View our product and criteria guides at chli.co.uk
01252 365 888
sales@chlmortgages.co.uk
FOR INTERMEDIARY USE ONLY.
CHL Mortgages is used under licence by CHL Mortgages for Intermediaries Limited. Registered office: Admiral House, Harlington Way, Fleet, Hampshire, United Kingdom, GU51 4YA (Company No 12954007).
*Source: Bank of England
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