Buy to Let Portfolio Mortgages
Buy to Let – Portfolio Mortgages
What is a portfolio mortgage?
There is no mortgage product known as a ‘portfolio mortgage’, nor are there specific mortgage products aimed at Portfolio Landlords. Portfolio Landlords use standard Buy to Let mortgages, much like any other landlord.
The differences lie in the mortgage application process. There is less availability given that there are fewer lenders offering mortgages to Portfolio Landlords. They are also more difficult to attain, given stricter lending criteria.
What is a Portfolio Landlord?
Portfolio Landlords are those who own four or more mortgaged properties. Whilst in the past Portfolio Landlords may have had access to aggregate lending, which would allow them to combine and manage all of their Buy to Let property mortgages together, this option is no longer available.
There is no maximum number of properties a Portfolio Landlord can own, however, mortgage options will reduce as the portfolio increases, particularly for those who own more than ten properties.
How do Portfolio Landlords finance their properties?
The Prudential Regulation Authority (PRA) regulates the majority of Buy to Let lenders, introduced stricter underwriting standards for Portfolio Landlords in 2016. This was predominantly due to the changes in tax liability on Buy to Let properties, which meant that those with multiple properties would experience a significant increase in tax liability.
As a result of this, many lenders will no longer offer Buy to Let mortgages to those with a portfolio of more than four properties. Whilst it is slightly more difficult for a Portfolio Landlord to obtain a mortgage, however, they are available. Those lenders who are willing to offer mortgages in these circumstances will require additional documentation in your support of your mortgage application.
This will vary between lenders, but most are likely to need:
- Evidence of your experience as a landlord
- Mortgages details for all of your buy-to-let properties
- Information about all assets and liabilities, including tax liability
- Proof of income from your portfolio and any other sources
- Evidence of stable cash flow from your current investment properties and expected stability from your future investment property(ies)
Whilst those with a smaller portfolio of less than ten may still find that high street lenders are an option, those with ten or more properties are likely to need to apply to specialist lenders through a mortgage broker.
How much can I borrow as a Portfolio Landlord?
As a Portfolio Landlord, lenders will be more cautious with how much they are willing to lend, than with a non-portfolio borrower. Whereas with standard Buy to Let mortgages, the loan amount is based predominantly on the potential rental yield from the property you wish to buy, with portfolio borrowers, lenders ICR ( Interest Coverage Ratio) across each individual property. As such it is difficult to define standard loan ratios and this will depend on each the profitability of an individual’s current rental properties, as well as their overall financial stability.
Buying through a Limited Company
Many landlords have realised the tax benefits of financing their Buy to Let properties through a limited company. Particularly those with an existing portfolio of more than four properties may increase the availability of mortgages, given that corporation tax is charged at a lower rate than income tax, meaning lenders can be more flexible with their criteria.
An SPV (Special Purpose Vehicle) can be set up for both individuals or existing limited companies and these are designed solely to deal with your Buy to Let portfolio.
Preparing Your Business Plan
However you choose to apply for a Buy to Let mortgage for the next property in your portfolio, lenders will want to see a substantial business plan. This will need to include information about your full portfolio of properties, including what type of tenants are in situ, plans for property vacancy, and future income potential.
Why Use The Mortgage Broker (London) Ltd?
At The Mortgage Broker (London) Ltd, it’s our vision to become the UK’s most trusted and respected mortgage broker. The only way for us to achieve this is by providing straightforward and transparent advice to every one of our clients.
From your first call to your last, we put customer service first before all else so you can be confident in getting expert mortgage advice.
Your home may be repossessed if you do not keep up repayments on your mortgage.
We offer FREE no obligation advice with no hidden costs. Payment is only taken when we proceed with the application. Therefore if we don’t complete any business, the customer never pays a penny.