Blended ICRs – What are they and how can they help you?

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May 5, 2022

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If you’re a landlord you know that when looking to get a loan of a certain size, majority of the time, the loan amount is based on the rental income received from the property and the property value. However some lenders can use ‘Blended ICRs’ (Interest Cover Ratio) which can boost the loan amount.

What is an ICR?

An Interest Cover Ratio was introduced when the Prudential Regulation Authority (PRA) brought in stricter Buy to Let Standards in 2017 – resulting in lenders restricting their borrowing in terms of loan amount. The ICR is basically part of the affordability calculation that is typically applied to and is up to 145%.

So that you can understand how it works, the lenders use the below calculation:

(Loan amount required * 5.5%) / 12  * 145% = Rental Income Required

What is a blended ICR?

Say you are a higher rate taxpayer and want to purchase a Buy to Let property. As a higher rate tax payer than would be restricted to an ICR calculation of 145% and may not be able to obtain the loan amount required. Now let’s say that your partner was a basic rate tax (where an ICR of 125% is used and therefore a higher loan amount can be obtained) and was to go on the mortgage with you, this would mean that the lender could use a blended ICR and you could borrow the amount you need.

Published On: May 5th, 2022 / Categories: Buy to Let, Mortgages / Tags: , , , , , /

One Comment

  1. Richard January 5, 2023 at 3:38 pm

    Following the aftermath of the mini budget, most buy to let lenders increased the rates they base their ICR on. This has resulted in reduced borrowing or higher rental income requirements for most landlords.

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