Virgin Money launch improvements to buy-to-let rental tests
The following applies to any buy-to-let Decision in Principle (DIP) for Virgin Money from Wednesday 18 April:
Improvements to Virgin Money’s buy-to-let rental tests:
Interest rate stress on 5 year fixed products is now 5.00%
Virgin Money lowered their interest rate stress for 5 year fixed rate products from 5.24% to 5.00%. For all other products, the interest rate stress remains at 5.50%.
The required rental cover remains at 145%.
Straight balance swap interest rate stress reduced from 5.99% to 5.50%
The lender applies a different interest rate stress on buy-to-let remortgages where there is no additional borrowing. This is now offered at a lower interest rate stress of 5.50% across all products, at 125% of rental income.
Personal income now considered to cover any rental shortfall between 100% and 145%
Virgin Money will now consider landlords’ personal income to cover any rental shortfall between 100% and 145%, calculated at an interest rate stress of 5.50%.
In order for personal income to be used, there is a minimum income requirement of £50,000 (combined income for joint applications).
Summary of changes:
| Buy-to-let standard affordability | Interest rate stress | ||
| Application type | Rental income | 5 year fixed products | All other products |
| Purchase and remortgage with additional borrowing | 145% | 5.00% | 5.50% |
| Remortgage straight balance swap | 125% | 5.50% | 5.50% |
| Personal income affordability* | Rental cover | Interest rate stress | |
| Application type and product | Min rental income | Personal income between | All products |
| All buy-to-let applications and products | 100% | 100% – 145% | 5.50% |
* For personal income to be used, the minimum income required is £50,000 (combined income for joint applications).
Affordability Assessment for Limited Company Directors:
Virgin Money continues to offer a fantastic proposition for limited company directors with operating profit and directors salary. To ensure they continue to lend responsibly in this area, their allowable income calculation is changing to take operating profit after tax in the affordability assessment. The lender will continue to use the director’s share of salary in the affordability assessment.
To verify income for limited companies, Virgin Money will require 3 months’ personal bank statements for applicants where their shareholding is less than 100%.
For cases agreed under the current policy Virgin Money will honour any outstanding DIPs if they have not been fully submitted to application, but would encourage you to submit these cases as soon as possible.