Rent down valuations hitting buy-to-let mortgage borrowers

Buy-to-let mortgage applications are failing because surveyors are ‘down valuing’ the rental income and advising lenders accordingly.

In some cases, they are even down valuing the rent already being received.

The claims come in a story in The Sunday Times, which says that some lenders are rejecting landlords’ rental estimates.

Most lenders want to see monthly mortgage repayments covered by rent with a 25% excess, to cover expenditure and void periods. Some lenders want to see 130% of rental cover, while others are happy with 100%.

Down valuing the rent could mean either outright rejection of the application, or that a lender will cap the amount they will lend to well under the borrower’s expectations.

Andrew Montlake, of brokers Coreco, said: “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.”

Another broker, Aaron Strutt, of Trinity Financial, said that it was a good idea for landlords to provide the valuer with evidence of other rental incomes or valuations locally.

He said: “However, one of our clients provided 12 comparable rental incomes and we still couldn’t get the decision changed.”

David Whittaker, of specialist lender Mortgages for Business, warned that landlords must be realistic. He said: “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.”

According to LSL, rents are falling, but very marginally – 0.1% in February, and with rents higher than a year ago. The steepest rent falls have been in central London where corporate budgets have been slashed.