On 30th September, the mortgage lending criteria for landlords with four or more buy-to-let properties has changed, meaning they are now seen as “portfolio investors”.
Following on from our news story last month, the new rules mean that lenders will now take into account landlords’ total income versus borrowing across all their portfolio of properties. i.e. Any new application for a further buy to let (BTL) mortgage is examined not just with reference to the single property in question, but the whole of the landlord’s portfolio holdings.
Rental income, property values, geographic spread, and any loans across all the properties in a landlord’s portfolio will be considered.
Why the change?
This change was introduced by the Prudential Regulation Authority and is designed to ensure that borrowing on any new properties does not have a negative impact on the landlord’s ability to repay their BTL mortgages and other loans on other properties within their portfolio.
For landlords with a portfolio of properties, this typically means they need to be well organised before applying for a further BTL mortgage.
Tips for portfolio investors
According to an interview in the Henley Standard with local estate agents, landlords should ensure they seek financial advice when they want to invest in a new property or remortgage an existing one. This is because the tightening up of lending criteria means there may now be a limited choice of lenders and products.
Landlords should also have up-to-date rental valuations to ensure their property is marketed at the correct price and check current lenders are happy to offer their services to a “portfolio landlord”. But what else do they need to do?
Keeping detailed, up-to-date records for each of their properties is also important. This may typically include details of:
- the current mortgage value;
- rental income;
- outgoings (including landlord’s portfolio insurance) and rental profits.
Landlords with portfolios should also ensure they have tax returns for all properties they own.