Buy to Let Portfolio Mortgage

How does a mortgage for a portfolio landlord differ from a regular Buy to Let mortgage?

First we need to confirm what a portfolio landlord is – and it’s a property owner with more than three properties. So, an individual that owns four or more Buy to Lets is classed as a portfolio landlord.

The rates and mortgages are more or less the same, but you’ll have different stress rates. It means landlords can potentially borrow a little bit less or a little bit more, depending on the strength of their portfolio.

What are the eligibility requirements for a portfolio landlord mortgage? What documentation is typically required?

The standard requirement is that you own four or more Buy to Let properties. You will also need experience as a landlord – usually at least 12 to 24 months.

A good credit history is always needed, and you will be asked for proof of surplus income from the portfolio. The portfolio needs to be making a profit, because if it’s not, most lenders won’t lend you the money to add to your portfolio.

What is the maximum number of properties that can be included in a portfolio landlord mortgage?

It varies from lender to lender. Some cap it at 10, some at 20. Some lenders may only allow a certain number of properties under them – perhaps three, although you might have 10 in the portfolio.

Do I need a deposit for a mortgage as a portfolio landlord?

Yes. It’s very similar to buying a property in the standard way – you’re just adding another one to your portfolio. You need the standard 25% deposit as a minimum. The lower your Loan to Value, the better the rate you’ll get.

What eligibility criteria do lenders consider when evaluating a portfolio landlord’s experience and track record?

Lenders generally assess the length of time as a landlord; the size and type of the existing portfolio; past mortgage payments and rental history. They also check what’s been received in rent and your management experience comes into account too.

Credit plays a role as well. Repossessions or anything where you’ve missed payments can affect your mortgage options as a portfolio landlord.

How do lenders assess the affordability of a mortgage for portfolio landlords?

First they’ll individually stress the property you’re buying, using the individual stress rate of either 125% or 145% against a 5.5% interest rate.

They assess the wider portfolio as well. If the portfolio is not making a profit, that will affect your ability to buy and add more property.

Does a portfolio mortgage have to be through one lender? Can it be different lenders for individual properties?

Most portfolio landlords have mortgages with different lenders – it doesn’t have to be through a single one. Lenders each assess the portfolio differently and some will cap how many properties you can have with them.

What happens if a portfolio landlord’s existing properties do not meet lending criteria?

The existing properties may not meet lending criteria if they’re not making a profit, have low rental coverage or are in poor condition. Lenders have the right to reject the new property, as they are assessing how you manage your existing portfolio before adding another one.

You need to take care of your existing portfolio before going into the market for a new property.

What types of properties can be included in a portfolio landlord mortgage?

Standard Buy to Let properties are generally a given, as are Houses in Multiple Occupation (HMOs). Houses in multi-unit freehold blocks (MUFBs) are also popular with portfolio landlords.

Restrictions may apply more to the property type. Is it above a commercial property like a dry cleaner or a fast food shop? Those factors can affect you adding to your portfolio.
Non-standard construction types can also be restricted. Standard properties are very easy to get, though.

Are there any additional fees or charges associated with a portfolio landlord mortgage?

If you’re just adding to your portfolio, the standard fees apply. If you’re looking for lending against your portfolio, there can be additional fees to value each property.

Arrangement fees may be higher and there may be legal fees and broker fees to take into account. Adding to your portfolio would more or less be the same, but mortgaging or remortgaging your existing portfolio under one mortgage can definitely be expensive.

What are the potential benefits of a portfolio landlord mortgage?

If you get a portfolio mortgage against all of your properties, it allows streamlined management, potentially better rates for larger borrowing and greater leverage. You probably have more equity in your portfolio overall, which means you can leverage the lender to get better rates. It can also give you easier access to cash flow.

Are there any limitations on the locations of properties with a portfolio landlord mortgage?

Some lenders may restrict exposure in certain regions. Some don’t like lending outside London or in certain city areas, so bear that in mind. Lenders may not cover properties outside of England and Wales.

Location can definitely affect how much lending you can get on your portfolio, if there is restricted exposure.

What else would you like to add before we come back with part two?

Portfolio landlords are subject to stricter Prudential Regulation Authority rules. Most portfolio landlords do use a broker, but if you are looking to add or remortgage your portfolio, do speak to a mortgage broker. We can certainly help landlords thanks to our experience and flexibility.

YOUR PROPERTY 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.