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September 2017 saw the Bank’s regulator, the PRA, bring in a new series of requirements that Banks must follow when lending to portfolio landlords.
Below is a series of the common questions we are asked by our landlord clients
Why did the Bank regulator do this?
The regulator, at the time, saw a large increase in BTL mortgages and they wanted to ensure Banks were lending responsibly.
Am I a portfolio landlord?
If you have 4 or more BTL mortgages (this includes mortgages in joint names or ones that you are part of in a ltd company) you are classified by the lenders as a portfolio landlord.
How have the changes impacted portfolio landlords?
All lenders will need to undertake more credit checks than previously required before agreeing a new mortgage. These credit checks involve the standard checks of looking at the applicant and the property being mortgaged in terms of loan to value and affordability. However, now there are the additional credit checks of looking at the existing property portfolio and factoring into account:
- The value of the properties in the portfolio
- The total of all of the existing outstanding mortgages so an overall loan to value can be calculated for the portfolio
- The rental income on the portfolio and the existing mortgage commitments
- The impact a future increase in interest rates will have on the portfolio
- Some lenders will also require a business plan
What steps do I need to take?
Use a portfolio summary template to summarise your portfolio to a lender and ensure it is up to date with accurate rents, mortgage payments, valuations and mortgage balances. Advocate Finance have a template that you may use that all lenders will accept.
Make sure all rental income goes into a separate rental bank account. If you have separate bank accounts for ltd companies make sure the rents go into the correct bank accounts. Lenders now check the rents paid in the bank account against the portfolio summary, so it is important to have accurate bank accounts.
How we can help you
Advocate Finance has been working with first time and portfolio landlords for over 12 years. We have an in-depth knowledge of these requirements and how to present your case to a lender, so it meets these new requirements.
It is more important than ever to seek the advice of an adviser who specialises in this market.
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