Finding the Best UK DSCR Loan: How Do the Top Lenders Compare?

Luna

Updated on:

most flexible dscr lender options

Debt Service Coverage Ratio (DSCR) loans are gaining popularity among certain borrowers due to their flexible qualification requirements. But with so many lenders offering DSCR mortgages, how do you identify the best loan for your needs?

This comprehensive guide examines the top UK DSCR lenders to help you find the right loan product and lender for your unique situation. We’ll cover key factors like rates and fees, loan programs, qualifying criteria, and more. Read on to make an informed decision when financing investment properties or unconventional income sources.

What Exactly Are DSCR Loans and Why Are They Helpful?

Before diving into top providers, let’s review what DSCR loans are and their key benefits.

What is a DSCR Mortgage?

A DSCR loan is a non-conforming mortgage that approves borrowers based on the property’s projected rental income rather than the applicant’s income, credit score, or debt-to-income ratio.

To qualify, the property’s net operating income must be high enough to cover the proposed mortgage payment by a set factor, usually around 1.0 to 1.25. This is known as the debt service coverage ratio or DSCR.

When Are DSCR Loans a Good Option?

DSCR loans provide more flexible qualifying criteria for certain borrowers:

  • Self-employed – DSCR loans can assist borrowers with complex incomes like self-employment, side gigs, and variable earnings that don’t fit traditional underwriting.
  • Real estate investors – Investors often use DSCR loans to purchase rental properties. Cash flow, not personal income, is the focus.
  • Lower credit scores – Minimum credit scores are often lower for DSCR loans than conventional mortgages.
  • Higher debt-to-income – Applicants can surpass the standard 36% DTI limit with sufficient rental income.
  • Foreign nationals – DSCR loans are an option for foreign buyers unable to qualify for domestic programs.
  • Expats – British expats living abroad may still be eligible for UK DSCR loans.

Drawbacks of DSCR Mortgages

While flexible, DSCR loans also have some potential downsides:

  • Higher rates – Interest rates average 1-2% higher than conventional mortgages.
  • Large down payments – At least 25% to 35% down is usually required.
  • Limited terms – Most DSCR loans have maximum terms of 25 years.
  • Prepayment penalties – Refinancing or selling early often incurs prepayment fees.
  • More legwork – Extensive documentation is needed to prove property income/expenses.

Now that you understand the DSCR concept, let’s compare leading lenders!

How Do the Top UK DSCR Lenders Compare on Rates, Terms, and Criteria?

Many factors influence DSCR loan options and costs. Here’s an overview of how popular UK lenders compare across key categories:

Beeline

Beeline stands out as the best overall DSCR lender based on rates, flexibility, and service.

Pros

  • Competitive fixed and variable rates from 4.99%
  • Finances single-family rentals, multi-family properties, and Airbnbs
  • Low minimum DSCR of 1.0
  • Up to 80% LTV, £150K to £2M loan sizes
  • Fast approvals and funding in as little as 10 days

Cons

  • 5% origination fee
  • Limited 25-year terms

With excellent customer service, flexible qualifying, and better rates than competitors, Beeline leads for top-notch UK DSCR loans. The lender accommodates diverse incomes and property types while offering some of the lowest DSCR rates available.

New Silver

New Silver focuses on bridging and development finance but also provides DSCR products.

Pros

  • Competitive variable rates from 4.5%
  • Finances single-family rentals and multi-family
  • Low minimum DSCR of 1.15
  • Up to 75% LTV

Cons

  • 5% arrangement fee
  • Max 2-year terms

New Silver offers fast access to funding with variable rates under 5%. Their streamlined DSCR loans work for both individual and multi-unit properties. But short terms and high fees limit long-term financing flexibility.

Griffin Funding

Griffin Funding brings extensive property lending experience to their DSCR offering.

Pros

  • Fixed and variable rate options
  • Finances single-family rentals and multi-family
  • Foreign national program available
  • Up to 75% LTV

Cons

  • Rates from 4.99%
  • 1.3 minimum DSCR
  • Large minimum loan size of £500K
  • 5% arrangement fee capped at £4,500

Griffin delivers solid DSCR loans for mid-to-large investment properties and cross-border buyers. However, higher rates, large loan minimums, and a higher DSCR requirement reduce flexibility for some.

Truss Financial Group

Truss Financial Group focuses specifically on commercial financing.

Pros

  • All commercial property types eligible
  • Low minimum DSCR of 1.0
  • Up to 75% LTV

Cons

  • Rates from 4.5%
  • Minimum £100K loan size
  • 2% arrangement fee

Truss brings valuable commercial real estate lending experience. But DSCR qualification requires at least £100K loans, limiting options for smaller investors.

North American Savings Bank

North American Savings Bank (NASB) offers DSCR mortgages to overseas buyers.

Pros

  • Foreign national program
  • Finances single-family and small multi-family
  • Competitive rates from 4.5%
  • Up to 65% LTV

Cons

  • 5% origination fee
  • 1.25 minimum DSCR
  • Max 25-year terms
  • Prefers large loan sizes

NASB gives international investors access to UK property financing. However, they cater more to affluent borrowers with large down payments and higher DSCR requirements.

Kiavi Funding

Kiavi Funding focuses on fast, streamlined DSCR loans.

Pros

  • Secures approvals in 1 week
  • Funds in as little as 2 weeks
  • Low minimum DSCR of 1.0
  • Up to 75% LTV

Cons

  • Rates from 4.99%
  • 5% origination fee
  • Max 25-year terms

Kiavi emphasizes speed and convenience. Approvals and funding happen quicker than traditional lenders. But higher rates and costs reduce long-term savings.

Lima One Capital

Lima One Capital is a large, US-based lender with a UK presence.

Pros

  • All residential and commercial properties
  • Starts at just 1.0 DSCR
  • Up to 75% LTV

Cons

  • Rates from 4.99%
  • 5% origination fee
  • £50K minimum loan size
  • Prefers multi-family/commercial

Lima One boasts an extensive property portfolio. However, they focus more on larger multi-family and commercial real estate rather than individual rentals.

Angel Oak Mortgage Solutions

Finally, Angel Oak offers DSCR mortgages alongside other non-QM loan programs.

Pros

  • Competitive rates from 4.5%
  • Single-family and multi-family properties
  • Starts at just 1.0 DSCR

Cons

  • 5% origination fee
  • £75K minimum loan size
  • Max 25-year terms

Angel Oak brings lower starting rates to their DSCR product. Yet they still charge origination fees and cater more towards larger loan amounts.

Which Types of Properties Can Get a DSCR Mortgage?

DSCR loans work for different rental property types, from single-family rentals to large commercial real estate. Availability depends on the lender.

Single-Family Rentals

Most major lenders finance single-family investment properties like detached homes, row houses, and bungalows. This allows individual investors to buy and rent out properties.

Multi-Family Properties

Multi-family properties with 2-4 units like duplexes, triplexes, and quads are commonly eligible as well. Some lenders accommodate larger apartment buildings too.

Holiday Lets/Airbnbs

If run properly, short-term holiday let properties generating nightly/weekly income can also qualify for DSCR loans.

Commercial Real Estate

Lenders like Truss and Lima One specifically offer DSCR loans for commercial buildings like office spaces, retail shops, warehouses, mixed-use, etc.

New Builds/Renovations

Construction and renovation loans may also use DSCR calculations. This helps investors finance projects pre-leasing.

DSCR qualification hinges on the property generating sufficient rental income, not type. But options vary by lender, so research individual policies.

What DSCR Levels Do UK Lenders Require?

The debt service coverage ratio dictates how much net rental income compares to the proposed mortgage payment. Minimum requirements vary by lender.

What is Considered a Good DSCR?

Most lenders fall between 1.0 to 1.25 DSCR. This means the property’s net operating income equals 100% to 125% of the requested mortgage payment. Some considerations:

  • Lower DSCR (1.0 to 1.15) – More risk but offers financing to more applicants
  • Moderate DSCR (1.15 to 1.25) – Balances flexibility and safety
  • Higher DSCR (1.25+) – Stricter but reduces default likelihood for lenders

DSCRs of 1.0 provide the most financing flexibility for borrowers. Values between 1.15 and 1.25 offer a good middle ground. Requirements above 1.25 give the lender a larger cushion but limit loan eligibility.

Comparing Minimum DSCR by Lender

Here are the starting DSCR levels for the featured lenders:

  • Beeline – 1.0 DSCR
  • New Silver – 1.15 DSCR
  • Griffin Funding – 1.3 DSCR
  • Truss Financial – 1.0 DSCR
  • NASB – 1.25 DSCR
  • Kiavi – 1.0 DSCR
  • Lima One – 1.0 DSCR
  • Angel Oak – 1.0 DSCR

More finicky lenders like Griffin and NASB stick to higher minimums. While Beeline, Truss, Kiavi, Lima One, and Angel Oak will go as low as 1.0 DSCR for maximum financing flexibility.

How Much Can You Borrow with a DSCR Mortgage?

Loan-to-value ratios and loan amounts also impact borrowing power with a DSCR loan.

Typical UK DSCR Loan-to-Value (LTV)

The maximum percentage of the property’s value lenders will finance ranges from 65% to 80% LTV:

  • 65% LTV – More conservative but requires larger down payments
  • 75% LTV – Common maximum for DSCR loans
  • 80% LTV – Offered by fewer lenders but allows lower down payments

Higher LTVs mean less money required upfront. But most lenders cap DSCR loans around 75% LTV due to the higher-risk nature.

Comparing LTV Ranges by Lender

Here are the top LTVs from the featured providers:

  • Beeline – Up to 80% LTV
  • New Silver – Up to 75% LTV
  • Griffin Funding – Up to 75% LTV
  • Truss Financial – Up to 75% LTV
  • NASB – Up to 65% LTV
  • Kiavi – Up to 75% LTV
  • Lima One – Up to 75% LTV
  • Angel Oak – Up to 75% LTV

Beeline stands out for offering up to 80% LTV for low down payments. NASB takes a more conservative approach with 65% maximum LTV.

Typical UK DSCR Loan Amounts

Loan sizes usually range from £50,000 to £2,000,000 depending on property value and LTV. Higher balances require larger, more expensive properties.

Some lenders also impose minimum loan amounts, often £50K to £100K. This caters loans to larger investment properties rather than cheaper individual rentals.

What Other Costs and Fees Does a DSCR Loan Have?

Like all mortgages, DSCR loans come with fees and closing expenses that add to long-term costs.

Common UK DSCR Costs and Charges

Be prepared for these typical fees when obtaining a DSCR mortgage:

  • Interest rate – The ongoing rate paid, usually variable between 4.5% and 5.5%.
  • Arrangement fee – Upfront charge by the lender, often around 2-5% of loan value.
  • Valuation fee – Covers property appraisal. Usually £200 to £1,500.
  • Legal fees – Paid to solicitors for conveyancing, around £500 to £2,000.
  • Broker fee – If using a broker, up to 1% of loan value.
  • Early repayment charges – Exit fees if paying loan off early, often 5% within 2 to 5 years.

Higher rates and large upfront arrangement fees like 5% quickly increase costs compared to conventional mortgages.

How Quickly Can You Get Approved and Funded?

DSCR loans generally take 1 to 3 months to close, slower than standard mortgages. However, some lenders now offer faster service.

Here are estimated timeframes by lender:

  • Beeline – 10 days to funding
  • New Silver – 4 weeks to funding
  • Griffin Funding – 4 to 8 weeks to completion
  • Truss Financial – 6 to 8 weeks to completion
  • NASB – 6 to 8 weeks to completion
  • Kiavi – 2 weeks to funding
  • Lima One – 30 days to funding
  • Angel Oak – 30 days to close

Beeline and Kiavi stand out with possible funding in as little as 10 days. While more traditional providers like NASB and Angel Oak take 6 to 8 weeks for full approvals.

If needing financing urgently, specialized fast lenders can now compete with slow institutional banks. But quicker service often comes with higher rates or points.

Which Lender is the Best Fit for Your Situation?

With an overview of leading UK DSCR lenders, how do you pick the right financier for your investment property purchase?

Consider Your Specific Loan Needs

Evaluate factors like:

  • Loan amount – Do minimums or maximums fit your budget?
  • Property type – Does the lender finance your desired rental?
  • Credit score – Does your profile meet minimum criteria?
  • Timeframe – Do you need funding ASAP or is slower OK?
  • Future plans – Will prepayment penalties restrict long-term flexibility?

Matching your situation with compatible loan features ensures the best fit.

Compare Interest Rates and Fees

Crunching total costs gives the real bottom line between lenders:

  • Estimate total interest paid over the loan term at different rates.
  • Add up all one-time fees like origination and arrangement costs.
  • Compare overall outlay between lenders over time.

A lower rate can be negated by high upfront points or vice versa. Calculate total expenditures for the true winner.

Read Lender Reviews

Look beyond rates and requirements to how actual customers rate services:

  • Were lenders transparent about costs and processes?
  • Did they deliver on advertised timelines?
  • How responsive were loan officers during applications?
  • Would borrowers use the lender again?

Vetting reviews ensures you’re getting the full package – fair rates, efficient service, and helpful support.

Consider Using a DSCR Mortgage Broker

Brokers can research products on your behalf:

  • Tell them your scenario and goals.
  • They search and compare relevant loan options.
  • Streamlined application instead of contacting multiple lenders.
  • Pay broker fees around 1% of loan value instead of time spent.

Good brokers simplify selection with personalized loan recommendations. But verify their reputation and expertise first.

Final Thoughts – Finding the Right UK DSCR Loan

DSCR mortgages provide flexible financing options for unconventional borrowers and real estate investors not met by standard loans. But choosing the ideal lender involves more than just comparing rates.

Carefully evaluate your property, financials, and borrowing needs. Research how well potential lenders satisfy those criteria through their policies, reviews, and total costs. Rushing into a quick rate without considering the full picture can backfire long-term.

While more time consuming than conventional loans, taking a thorough approach helps locate your best fit UK DSCR lender and maximize both financing and savings. The flexibility and expanded options make the extra diligence worthwhile for the right applicant.


Avatar

Hello! My name is Luna, and I am a freelancer in the finance niche. I have a passion for helping people understand their financial options and make informed decisions about their money. My website, DSCR Loan UK, serves as a resource for those looking for information on loans, budgeting, saving, investing, and more. I strive to provide practical and easy-to-understand advice that can help people make smart financial decisions.