Portfolio landlord mortgages

Portfolio landlord mortgage criteria under the PRA rules

Portfolio landlord mortgage criteria follow from the Prudential Regulation Authority rules, which require lenders to underwrite a landlord with four or more mortgaged buy to let properties on a whole portfolio basis. In practice that means the lender wants a portfolio schedule listing every property, its value, its mortgage, its rent and its loan to value, a business plan explaining the strategy, and often a cash flow forecast and an assets and liabilities statement. On top of that, each lender sets its own portfolio landlord criteria: the maximum number of mortgaged properties it will accept, the total exposure it will take to one borrower, the aggregate loan to value across the portfolio, the property types it will fund, and whether it lends to individuals, a limited company or an SPV. Because many lenders cap the portfolio size or the total lending to one landlord, a large portfolio is usually spread across several lenders by design rather than concentrated with one. Each lender applies its own lending criteria and affordability tests, and the packaging of the case, how the rental properties, the interest rate assumptions and the interest cover ratio ICR are presented, often decides whether a product is offered. We prepare the portfolio schedule, the business plan and the rental income evidence so the case is underwritten cleanly first time. All criteria are indicative, vary by lender, borrower and property, and are not an offer of finance.

How lenders stress test a portfolio landlord

Lenders stress test a portfolio landlord by applying an interest cover ratio to the rent on each property against a stress rate, and then reading that across the whole portfolio. The loan on the property being financed is sized on the rent it produces, indicatively up to 75 to 80 percent loan to value, but the lender also checks the aggregate loan to value and the total rental income across every mortgaged property to confirm the portfolio as a whole is not overstretched. A landlord whose background portfolio is lightly geared and well tenanted has headroom to borrow more; a landlord already near the aggregate cap may find the next loan reduced or declined. Some lenders apply a minimum aggregate interest cover ratio across the portfolio as well as the per property test. We model the interest cover on the buy to let mortgage calculator and check the aggregate position before approaching lenders, so the application goes to market at a level that will fund. The figures are illustrative, vary by lender and property, and are not an offer of finance.

Portfolio landlord mortgage rates and fees

Portfolio landlord mortgage rates track the wider buy to let market and depend on the loan to value, the interest cover ratio the rent supports, the property type and whether the borrower is an individual or a limited company. Portfolio landlords do not automatically pay more than other landlords, but the pricing reflects the specialist underwriting and the leverage across the portfolio. Each mortgage carries a lender arrangement fee, often a percentage of the loan on specialist products, a valuation fee per property and legal costs. Rates are commonly fixed over two or five years with an early repayment charge inside the fixed period, so across a portfolio the maturities are best staggered rather than clustered. We disclose our broker fee in writing and quote current indicative rate ranges and the all in cost across the portfolio rather than headline figures, and they are not an offer of finance.

Placing a portfolio landlord case with the right lender

The value of a broker on a portfolio landlord case is knowing which lenders want the portfolio and how each one stress tests it. Portfolio landlord criteria are among the least standardised in buy to let: lenders differ on the maximum portfolio size, the aggregate loan to value, the interest cover ratio, the treatment of HMOs and multi unit freehold blocks within a portfolio, and whether they lend to a limited company. Because many cap their exposure to one borrower, a portfolio is usually built across several lenders, and the order in which properties are financed and remortgaged matters. We hold the specialist lender relationships, we structure the portfolio schedule and the business plan the way each desk reads it, and we place the case where it will actually complete. Whether to hold personally or through a limited company is a decision for a landlord and their tax adviser; we do not give tax advice. We arrange portfolio landlord mortgages alongside portfolio mortgages, limited company buy to let, HMO and multi unit freehold block finance, and where a case would be a regulated mortgage contract or a consumer buy to let we refer it to an authorised firm.