Mortgages for portfolio landlords

In recent years, regulation on Buy-to-Let portfolio mortgages has tightened. Even so, the market remains strong owing to continued demand for rental accommodation.

The changes have led to increasing complexity in arranging a portfolio landlord mortgage. We recommend anyone considering buy-to-let seek professional advice from an experienced mortgage advisor.

An expert mortgage broker can help you understand all your potential options and responsibilities. As well as protecting your investment, you need to protect your tenants, too. It’s imperative you know where you stand on all fronts.

A good advisor will ensure you get the best available deal to match your investment intent. This could include Buy-to-Let properties (BTL), student lets, and even houses of multiple occupation (HMO).

We can help portfolio landlords with a complete range of requirements including:

• Portfolios ranging from 4 to 100’s of properties
• Buying an investment property at an auction
• Student Lets
• Multiple flats under one freehold
• Remortgaging within 6 months of ownership
• Property development finance
• Refurbishment finance
• Limited company buy-to-let arrangements
• Homes of multiple occupation (HMO)

What’s changed: new rules governing multiple buy-to-lets

In September 2016, the Prudential Regulation Authority overhauled the Buy-to-Let mortgage market. By January 2017, lenders had had to install stricter underwriting criteria for landlords. Many chose to increase rental expectation from 125% of the repayment to 145%.

In September 2017, further regulations for landlords—PRA Phase II—came into place. Landlords of four or more properties faced an even stricter underwriting process.

Phase II became the new rules for Buy-to-Let portfolio mortgages as we see them today. As well as stricter underwriting, portfolio landlords faced more scrutinous affordability checks.

Even with these sweeping changes to the rules, landlords still have lots of options. Help from a specialist mortgage broker can help them see through the fog of red tape. This should then make getting a Buy-to-Let mortgage for multiple properties straightforward.

Affordability checks and underwriting

In the past, lenders only needed to carry out affordability checks on the rental income. First, you had to have 25% deposit. Then, if rental income exceeded mortgage interest payments by 125%, you were fine.

Today, the new stricter affordability checks also take into account the level of tax you pay. The phased, increased tax burden for Buy-to-Let landlords in the coming years is just one extra source.

Landlords used to be able to offset mortgage interest payments against rental income. But in 2015, the government announced they were phasing this relief out.

In 2017-18 the tax relief you could claim reduced to 75 per cent. Fast-forward to 2019-20 and it dropped to only 25 per cent. By 2020-21, tax relief against interest had disappeared altogether.

This affordability calculation predominantly affects landlords who are higher-rate taxpayers.

Then, if you add the reduced tax relief from the 20% higher ICR into the mix? You’ll appreciate the complexity of building a large property portfolio in today’s market.

Portfolio BTL landlords

Anyone owning four or more mortgaged Buy-to-Let properties is a ‘portfolio landlord’. If that describes you, you will be subject to the new stricter underwriting checks.

As part of these checks, underwriters will need to ensure that you are financially sound. Before approving any more loans, they will assess your entire Buy-to-Let portfolio.

The criteria lenders are likely to consider are:

• Your experience as a portfolio landlord
• Details of your personal mortgage, plus all your buy-to-let properties
• Details of all your assets and liabilities
• Current and future expected cash flow from your portfolio
• A detailed breakdown of all your income sources

That’s a generic guide to lenders’ KPIs, if you like. Specific underwriting criteria vary from lender to lender. Allowing an experienced broker to pair you off with the right lender gives you a huge advantage.

How can Mortgage Quest help with buy-to-let portfolio mortgages?

Our advisors are highly experienced in helping borrowers secure Buy-to-Let portfolio mortgages.

You will have access to the whole of the market through us. We are 100% independent and ensure we pair your application with the right lender. That lender will have the best deal based on your portfolio and personal circumstances.

If you have questions and want to speak to an advisor, call our office direct on 020 8421 7998. Can’t talk right now? Submit your enquiry here.