Magellan Homeloans has launched a buy-to-let affordability calculator on its site where brokers only have to input basic borrowing requirements to see the maximum loan available on 2-year fixed, 5-year fixed and Libor trackers in one view.
Some lenders require brokers to input multiple calculations to see different options. However Magellan’s offering is said to produce the rate and monthly payment quicker as well as displaying it in one view that can be printed.
The calculator also shows Magellan’s approach of blending ICRs which reflects borrowers’ individual tax positions, rather than taking just the higher rate.
Simon Read, (pictured), managing director of Magellan Homeloans, said: “In its format this is an industry first. It’s for the ease of the broker, taking a couple of clicks rather than a whole morning working out calculations. Part of our job is to find ways to make life easier for our partners.
“When a low rate and a high rate taxpayer get a buy-to-let together lenders penalise the low rate taxpayers by stress testing on the high rate taxpayer.
“We offer affordability based on actual tax position, not workplace scenario. It’s fair, only paying tax on income. It’s fantastic and the way the market will go. Borrowers can take advantage of having a lower taxpayer on the mortgage. It’s a benefit for borrower reflecting their actual circumstances.
“For us it’s a real step forward and I hope it makes a difference and makes life easier. I think we’ll see lot of other lenders follow suit with a similar calculator and blended ICRs which we believe are the only way forward for individual borrowers.”
The calculator can be used for both personal name buy-to-lets and buy-to-lets in a limited company and flags where it’s apparent borrowers may be able to borrow a greater amount if they apply through a limited company, and would require further expert advice.
Matt Gilmour, chief executive officer at Magellan Homeloans, added: “The difference in personal and limited company and two and 5-year fixes can be huge. It could be the difference of tens of thousands or even a six figure difference.
“As a tool we hope it will be really helpful and make life easier. The feedback from our limited distribution was really positive. We think it’s obvious and really simple but maybe it’s revolutionary.”
The calculator also helps brokers become accustomed to the impact that varying stressed interest rates and income cover ratio (ICR) have on affordability.
Read added: “There’s lot different lenders stress testing differently. The interest rate level is wide and varied so it’s an awful lot for brokers to learn each lender’s approach, spending lots of time with different lenders to find out what they can lend.
“Although each has affordability calculators, brokers could spend 20 mins or so on them. Our calculator is impressive and does so in one viewing rather than multiple.
“It saves a huge amount of time and hopefully over time will help people to better understand implications of higher LTVs in the buy-to-let market.
“We thought about how we could make life easeier for brokers. Even sourcing systems at the moment aren’t helping brokers as much because they don’t have this level of complexity, leaving brokers in a level of limbo, not knowing which lender they should go to for the highest loan.”