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Buy to Let lending criteria

Buy to Let mortgages are available to both existing and non-HSBC customers, providing we do not consider them to be a professional/portfolio landlord.

All applications for Buy to Let mortgages are subject to the criteria set out in this guide.

Where we have not outlined a specific Buy to Let policy, the normal residential lending criteria apply.

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FAQs

Have a question about our lending criteria? You can find answers in our FAQ section.

Buy to Let lending criteria

HSBC for Intermediaries

This information is correct as of 28th July 2017

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HSBC Buy to Let mortgages are available to both existing and non-HSBC customers, providing we do not consider them to be a professional/Portfolio landlord.

All applications for Buy to Let mortgages are subject to the criteria set out in this guide.

Where we have not outlined a specific Buy to Let policy, the normal residential lending criteria apply.

Applicant

All borrowers must be a minimum of 18 years old at the start of the application. There is no maximum age for Buy to Let applications.

The total lending on Buy To Let mortgaged properties should not exceed £2,000,000 across all lenders.

Applicants must be an owner occupier of a residential property which they have lived in for at least 6 months.

For joint applications, at least one applicant must be an owner occupier of a residential property which they have lived in for at least 6 months. Where the applicants residential mortgage is not with HSBC, evidence must be provided to support the customers eligibility - for example a mortgage statement from their mortgage provider including drawdown date etc. If the property is unencumbered, clear notes should be added to the application to confirm the customers owner occupier status.

To be considered for an HSBC Buy to Let mortgage in the UK, an overseas customer must be living and working in one of our approved countries (for the list of approved countries, see the 'overseas customers' section of our residential lending criteria and must have a minimum income of £75,000 (excluding bonus, commission, overtime and rental income).

Overseas customers need to hold or open any UK current account or an HSBC Expat bank account to service their mortgage.

The bank does not provide BTL mortgage facilities where it has been evidenced that a customer is classified as either a Professional Landlord or a Portfolio Landlord. Residential mortgage facilities will only be accepted on the above basis whereby rental income is excluded from the assessment, but all expenditure related to the customer's BTL properties are included within the application.

Rental income can be used in the affordability assessment where the customer is not deemed to be a professional/portfolio landlord.

Where rental income is not being used to support the affordability assessment of a residential mortgage, there is no requirement to obtain evidence of any BTL income that the customer may have. However, all associated costs of the BTL's must be included in the affordability assessment.

A professional landlord is a person(s) with:

  • Buy to Let borrowing greater than £2m across all lenders; or
  • More than 50% of the customer's total gross annual income (joint income) is derived from rental income.

This includes income via a holding company.

A Portfolio Landlord is a person(s) with:

Four or more BTL mortgaged properties in aggregate at the end of the transaction

All Buy to Let borrowing and rental income must be evidenced by the customer, to support in the identification of Professional/Portfolio landlords. The following evidence must be obtained-

  • The latest year's tax return and/or business accounts
  • Mortgage bank statement(s) to show Buy to Let borrowing outstanding

Exceptionally, an extract from tenancy agreements and bank statements showing rental income, mortgage payments and outgoings related to the Buy to Let property are acceptable where:

  • Customer is paying tax related to their Buy to Let income via PAYE - this will need to be evidenced via a notice of coding and/or payslips; or
  • Properties have been purchased within the current tax year; or
  • Where the customer is not paying tax on the Buy to Let income due to their overall gross income level being less than their personal allowance.

Where a customer is unable to meet the above requirements, we are unable to agree Buy to Let borrowing.

HSBC accepts all tenant types except where the tenant is related to the landlord as we do not provide regulated mortgages in this respect.

Income

For sole applications, the minimum basic annual income is £25,000 (excluding all rental income).

For joint applications, at least one party must have a basic annual income of £25,000 (excluding all rental income).

Non-UK Residents - Minimum income of £75,000 (excluding bonus, commission, overtime and rental income)

For HSBC/first direct Employed Customers:

  • Evidence of income must be provided in line with our residential policy on 'Assessing Income'.

For non HSBC/first direct Employed Customers:

  • The latest payslip (or last 4 weeks where the customer is paid weekly): and
  • The latest months bank statement

Salary must be credited within 35 days of the application (credit decision obtained date)

For Self Employed customers:

  • Latest years audited or certified accounts; or
  • Latest years Tax Return

Borrowing

Affordability Assessment - Interest Only and Capital Repayment

Affordability for HSBC BTL mortgages can only be assessed using rental income.

Only rental income can be used to support the property which the HSBC BTL/CBTL is being secured against, other income cannot be used to support any shortfall.

A Professional Valuation is mandatory for all BTL applications and this will be used to confirm the monthly rental income based, whether furnished or unfurnished, and an assessment of rental demand for the property in that area.

Regardless of the repayment method we will assess affordability based on the annual rental income, which must be equal to or greater than 145 per cent of the annual BTL mortgage payments calculated at the stressed rate (currently 5.5 per cent) or product rate, whichever is higher. This takes into account potential future interest rate rises.

For example:
Mortgage - £150k
Interest Only monthly payment £687.50 (5.5% stressed rate)
Minimum rental income required per month - £996.88
Rental cover - 145%

To support the rental funded assessment, you will need to complete the rental assessment calculator in all cases.

First legal charge

HSBC Buy to Let mortgages can only be secured by a first legal charge (first ranking standard security in Scotland) over a residential property.

Purchase applications

For Buy to Let purchase applications we require the property to have vacant possession.

Insurance

Property must be adequately insured by the applicant at all times.

Property

The property must only be let under either an assured short-hold tenancy for a maximum of 36 months or a company let agreement. Houses of multiple occupancy (for example student lets), holiday lets and sub-letting are all excluded.

In the case of the Buy to Let purchase the property must have vacant possession.

All Buy to Let leasehold properties must have more than 35 years remaining after completion of term of the mortgage.

For more details, see the 'Property' section of our residential lending criteria.

For BTL applications where the property is already subject to an existing tenancy which will remain in place following completion, we will lend where the tenancy is an Assured Shorthold Tenancy and meets the following criteria:

  • The tenant must be an individual
  • The property must be occupied as the tenant's only or principal home

The tenancy must be dated on or after 28/02/1997 and must not be one that cannot be an assured tenancy.

A professional valuation is mandatory for all Buy to Let applications. For more details, see our residential policy on Valuations.

Product

For both repayment types, the minimum mortgage term is 5 years (60 months) and the maximum term is 25 years.

Minimum loan

For Buy to Let mortgages, the minimum loan is £25,000. For Buy to Let HomeOwner Loans/further advances, the minimum loan is £10,000.

Maximum loan

For Buy to Let mortgages and HomeOwner Loans/further advances (for non-debt consolidation purposes), the maximum loan amount is restricted by the following LTVs (interest only and capital repayment):

  • Up to and including £1 million, the maximum LTV is 75%; and
  • From £1,000,000 to £2,000,000, the maximum LTV is 65%.

For Buy to Let HomeOwner Loans/further advances for debt consolidation (interest only and capital repayment):

  • Maximum loan is £30,000; and
  • Maximum LTV is 60%.

Please note: Debt consolidation HOLs are not available to foreign nationals without indefinite leave to remain in the UK and Non-UK residents.

The loan to value is calculated using either the purchase price or the professional valuation of the property, whichever is lower.

HSBC accepts financial incentives up to 5% of the purchase price without impacting the Loan to Valuation (LTV).

Any amount above 5% must be deducted from the purchase price. Non-financial incentives do not need to be deducted from the purchase price and will not impact on LTV.

The total lending on Buy To Let mortgaged properties should not exceed £2,000,000 across all lenders.

Buy to Let mortgages are available on either a capital repayment or an interest-only basis. We accept sale of the BTL property as a repayment strategy. For further information on other repayment strategies see our residential lending criteria.

We do not currently offer loans to homeowners for home improvement purposes via HSBC for Intermediaries, unless they are linked to a remortgage from another lender. We offer homeowner loans directly to our customers in our branches and over the phone.

Please note, for homeowner loans/further advances linked to a remortgage from another lender the minimum loan amount must be no less that £10,000 with the remortgage element of the lending being no less than £1000 of the total loan.

Applicants may apply to remortgage at any time after they have completed their purchase. Please note that for properties owned for less than 6 months, we will require the applicant's solicitor to satisfy our responsible lending commitments and confirm the property was not purchased via a sub-sale style transaction.

Existing borrowers

Porting of HSBC Buy to Let mortgages is not currently available via HSBC for Intermediaries. Please ask your customer to contact us directly.

Converting a residential mortgage to a Buy to Let

We will accept applications to convert a residential mortgage held with another lender to an HSBC Buy to Let mortgage provided it is the customer's second residential property.

Switching of an HSBC residential mortgage to an HSBC Buy to Let mortgage is not available via HSBC for Intermediaries. Please ask your customer to contact us directly.

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