What are the new Leeds Building Society income plus mortgage criteria for next steppers?
Quick Answer
Leeds Building Society's Income Plus mortgage allows 'next steppers' to use 100% of rental income from an existing property to boost affordability on a new residential mortgage, provided the property is already let on an AST.
Leeds Building Society's 'Income Plus' mortgage criteria for next steppers allow applicants to utilise 100% of the second applicant's income and 100% of rental income from a previous property being retained. This specific lending product is designed to support borrowers who are moving to a new primary residence but wish to retain their current home as a buy-to-let (BTL) property. Unlike some lenders that may haircut secondary income or rental income for affordability calculations, Leeds Building Society's approach can increase the borrowing capacity for these 'next stepper' clients. Eligibility is typically contingent on the existing property having an Assured Shorthold Tenancy (AST) in place or a confirmed letting arrangement, and meeting specific rental coverage ratios for the retained property.
### How does 'Income Plus' benefit next steppers?
The 'Income Plus' criteria can significantly increase the mortgage amount a 'next stepper' can borrow by more comprehensively assessing their total financial picture. Typically, lenders might only consider a percentage of a second applicant's income or be very conservative with projected rental income from a property that is transitioning from owner-occupied to buy-to-let. By including 100% of both these income streams, Leeds Building Society aims to bridge the affordability gap that many aspiring 'next steppers' face when attempting to retain their existing property as an investment.
For example, if a primary applicant earns £50,000 and a second applicant earns £30,000, and their retained property generates £1,000 per month in rent, a standard lender might only count 75% of the second income (£22,500) and 50% of the rental income (£6,000 annually). Leeds Building Society, under 'Income Plus', could potentially assess £30,000 from the second applicant and £12,000 from rental income, significantly enhancing the overall assessable income for the new mortgage application. This difference can mean qualifying for a higher loan amount, enabling access to a more suitable new home.
### What are the key eligibility requirements?
The primary conditions for Leeds Building Society's 'Income Plus' facility centre on the nature of the retained property and the sustainability of the rental income. Firstly, the property being retained must genuinely be let out on an AST. It cannot be left vacant or used for short-term holiday lets under this specific criteria. Secondly, the rental income from the retained property must satisfy specific interest cover ratio (ICR) stress tests, which are lender-specific but typically require rental income to cover 125% or even 140% of the notional mortgage interest at a stressed rate, such as 5.5%.
Also, both applicants must meet standard mortgage eligibility criteria, including credit history, age, and employment status. The 'next stepper' status implies that the borrower is moving from their current primary residence to a new one, not acquiring an additional investment property without occupying it. This distinguishes the 'Income Plus' product from a standard buy-to-let mortgage where the applicant does not have a residential mortgage for themselves.
### What are the financial implications for investors?
Utilising the 'Income Plus' criteria has direct financial implications. The ability to retain a property as a BTL means a 'next stepper' can potentially benefit from capital appreciation and rental yield over the long term. However, it also means taking on additional debt and associated risks, such as void periods, maintenance costs, and increased Stamp Duty Land Tax (SDLT) on future property acquisitions. From August 2026, the additional dwelling surcharge means buying a second residential property incurs an extra 5% SDLT on top of the base residential rate, impacting acquisition costs significantly.
For instance, if a 'next stepper' buys a new home for £400,000 while retaining their old property, they would pay the standard residential SDLT on their new home. However, any subsequent buy-to-let property they acquire would be subject to the additional dwelling surcharge. This could mean a £300,000 BTL property would incur 5% on the £0-£125k portion, 7% on the £125k-£250k portion, and 10% on the £250k-£300k portion, rather than just the base residential rates.
### Important Considerations for Next Steppers
When considering the 'Income Plus' option, 'next steppers' must evaluate the overall financial commitment. This includes the responsibilities of being a landlord for their retained property, adhering to regulations such as the mandatory HMO licensing if they let to 5+ occupants from 2+ households, and ensuring the property meets the current minimum EPC rating of E (moving to C-equivalent by October 2030).
Additionally, mortgage interest is no longer deductible for individual landlords, with only a 20% tax credit on finance costs applicable. Capital Gains Tax (CGT) on any future sale of the retained property would also apply, at 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers, after the £3,000 annual exempt amount. These tax considerations are vital in calculating the true profitability of retaining the property as an investment.
### Investor Rule of Thumb
Always understand the full financial and regulatory implications of retaining a property as a buy-to-let before committing to a new residential mortgage, as increased borrowing capacity also means increased responsibility and costs.
### What This Means For You
Leeds Building Society's 'Income Plus' criteria can be a valuable tool for those wanting to expand their property portfolio while moving house. It highlights that niche lending products exist to support specific investor strategies. Understanding these options is critical for making informed decisions on your property journey. If you want to explore how specific lender criteria can be used to grow your portfolio, this is exactly what we analyse inside Property Legacy Education.
Steven's Take
The 'Income Plus' offering from Leeds Building Society is a prime example of how specific lender products can facilitate growth for 'next steppers' who wish to become accidental landlords. It reflects a growing understanding within the lending industry that many people want to retain their first home as an investment, especially in a market where capital appreciation has been strong. However, don't just jump at the increased borrowing capacity. You must stress-test the BTL element of your retained property rigorously, factoring in all costs including maintenance, potential voids, Section 24 tax implications, and possible future EPC upgrades. Make sure the numbers stack up for the BTL before you commit to the new residential mortgage. This is about strategic long-term planning, not just securing a larger loan.
What You Can Do Next
Contact Leeds Building Society directly or via a mortgage broker to confirm the latest 'Income Plus' criteria and eligibility for your specific circumstances.
Calculate the potential rental income for your retained property and compare it against typical BTL lender stress tests (e.g., 125% or 140% at a 5.5% notional rate) to ensure viability.
Review your local council's website for any specific landlord licensing requirements (e.g., mandatory HMO licensing for 5+ occupants) or additional landlord schemes that might apply to your retained property.
Consult a tax advisor to understand the full implications of Section 24 on your rental income and any potential Capital Gains Tax liability should you sell the retained property in the future.
Check your retained property's current EPC rating via gov.uk/find-energy-certificate and budget for potential upgrades to meet the C-equivalent standard by October 2030.
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