Portfolio Landlord Mortgage
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Portfolio Landlord Mortgage
James Bull is back to talk us through mortgages for portfolio landlords.
How does a portfolio landlord mortgage differ from a regular Buy to Let mortgage?
When you apply for a regular Buy to Let mortgage, each application and individual property is assessed on its own merits. But once you’ve got four or more mortgaged Buy to Let properties, under the regulations you’re going to be classed as a portfolio landlord.
What that means is that when you do a new mortgage application, your whole portfolio gets assessed in the background, as well as the property that the mortgage is for.
What are the eligibility requirements for a portfolio landlord mortgage? What documentation is typically required?
It’s exactly the same documents as required on any mortgage: proof of income, bank statements, photo ID etc. In terms of eligibility, lenders do have different criteria and it varies massively between lenders.
As a mortgage broker, we take all the clients’ details as part of our research – based on that, we’ll be able to recommend a lender that will accept your business.
What is the maximum number of properties that can be included in a portfolio landlord mortgage?
Each lender has different criteria. Some lenders do have maximums, but others don’t.
That’s our job as a broker. We take details of the client’s circumstances and all the properties in the portfolio, to recommend an appropriate lender for that particular circumstance. There are certainly lenders with no maximum limit on the number of properties.
What criteria do lenders consider when evaluating a portfolio landlord’s experience and track record?
Some lenders do set minimums. For example, you might need to have been a landlord for a minimum amount of time – but again the criteria does vary between lenders. It’s the same scenario. We’ll get all the details and take that into consideration when making recommendations.
What happens if a portfolio landlord’s existing properties do not meet lending criteria?
This doesn’t happen very often, to be honest. It might just be the case that you might not be able to get any further lending until the properties fall back within the parameters.
Obviously, we would explain exactly what needs to be done, why you’re not meeting the criteria and what to do about it.
How do lenders assess the affordability of a portfolio landlord mortgage?
The main thing is called rental coverage. There’s a mathematical formula that lenders use – which again varies between lenders. The main factors in this calculation are the total mortgage balance across the portfolio; the total monthly mortgage payments and the total amount of rental income that the portfolio is receiving.
Lenders then stress test the figures to make sure that, ultimately, the rent the portfolio is receiving will be high enough to cover the mortgage payments.
Sometimes lenders do have criteria around minimum personal income, which clients need to meet in the background.
What types of properties can be included in a portfolio landlord mortgage?
When we’re looking at portfolio mortgages, we only take into consideration residential Buy to Let properties. Anything commercial, such as shops or business premises, won’t be included.
Are there any additional fees or charges associated with a portfolio landlord mortgage?
There aren’t necessarily any specific extra fees or charges, but because of the lenders’ criteria and how complex they are, not all lenders are going to offer you a mortgage. There might only be just one or two lenders that will suit a particular client’s circumstances.
That in itself means that you’re at the mercy of whatever products that particular lender is offering. There’s not anything extra to pay specifically, but the restriction in options can affect the rates and fees available to you.
What are the potential benefits of a portfolio landlord mortgage?
The main benefit since they’ve been brought in is that when a client has a lot of mortgages, lenders check across the portfolio to make sure that it’s affordable. It’s about gaining certainty that the total rent is enough to cover the payments of all the mortgages.
Are there any limitations on property locations for a portfolio landlord mortgage?
Not really, it’s just subject to mortgage lenders’ criteria – which can vary. In general, there should be lenders available across the UK on all residential properties.
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Everyone’s different. You might be self-employed. You might have some credit history issues – whatever your situation, we will find the most suitable product available to you from across the whole market.
Are there any restrictions on the types of tenancies that can be considered for a portfolio landlord mortgage?
The properties in the portfolio are assessed as they are, but when you’re applying for your new mortgage, that property and tenancy needs to meet the lender’s criteria.
On a standard Buy to Let mortgage, they would expect a six to 12 month Assured Shorthold Tenancy, which is just a standard UK rental contract, to be in place.
If it’s a more specialised property, like an HMO (House in Multiple Occupancy), a holiday let or Airbnb, that’s still fine, but you have to apply with a lender that’s going to accept that type of tenancy. Again, that may restrict the products you can have.
Can a portfolio landlord mortgage be used for both residential and commercial properties?
The portfolio landlord rules only apply to residential properties – they don’t apply to commercial.
Are there any specific tax implications or considerations for portfolio landlords?
As a mortgage broker we don’t give tax advice, we’re not qualified or authorised to do so. If anybody asks about this, we recommend they speak to their accountant.
Just in general, however, any rental income you’re receiving from property does have to be declared to HMRC, and there are expenses that you can offset to reduce your profits. When you’re doing your tax return with your accountant, they will advise you on what you need to do in that area.
How can a portfolio landlord mortgage assist in growing a property portfolio?
Once you’ve got four mortgaged Buy to Let properties, a portfolio landlord mortgage is potentially going to assist you to buy the fifth property, and more beyond. Borrowing against a portfolio means that you can buy more properties than may otherwise be possible.
Is it possible to switch lenders or remortgage a portfolio landlord mortgage?
Absolutely. You can just remortgage, switch and borrow extra as you would with any other mortgage. It’s just that this extra portfolio criteria in the background has to be taken into consideration.
What role does rental income play in obtaining a portfolio landlord mortgage?
Ultimately, most landlords are going to be using the rental income to cover their mortgage payments. So obviously the rental income gets taken into consideration and is checked against the mortgage balance and mortgage payments.
The lender just assesses it in the background to make sure that the portfolio is affordable.
How do the interest rates on a portfolio landlord mortgage compare to other types of mortgage?
A portfolio landlord mortgage is a specialist product, and so you would expect the pricing on it to be a little bit higher than, for example, a First Time Buyer mortgage.
But our job as a whole-of-market mortgage broker is to find the best deal for your circumstances.
Can a portfolio landlord mortgage be obtained for properties owned jointly with others?
If we’re looking at a joint application and one of the parties on that application has four or more mortgaged Buy to Let properties, then yes, the application will end up falling under the portfolio landlord rules.
Is it possible to obtain a portfolio landlord mortgage if you have a bad credit history?
The definition of bad credit history can vary widely from person to person and lender to lender. We need to find out exactly what the problem is.
The first step would be to send a copy of your credit report to us. We’ll take a look at it and see exactly what the problem is. Based on that, we’ll be able to tell you what options are available.
How long does the application process for a portfolio landlord mortgage usually take?
For a mortgage broker the background research can take a little bit longer, especially when there’s a lot of properties in the background. There are also a lot of additional criteria on portfolio landlord mortgages, so our research does take time.
We need to make sure we find the right lender and once we apply for the mortgage, the underwriters have to do the same thing. The checks are going to take longer because they’re more complicated.
But the whole process doesn’t take a massive amount longer than a normal mortgage. We would still expect most mortgages to be approved in around a month from the point of application.
Ultimately it’s down to the lender and their service levels. If they are busy, it’s going to take longer. If a lender is quiet it might even be quicker.
Your home may be repossessed if you do not keep up with your mortgage repayments.
The Financial Conduct Authority does not regulate most Buy to Let Mortgages.
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