Portfolio Landlord Mortgages

Buy-to-Let properties have the potential to be a great investment opportunity. This is particularly attractive to people who prefer tangible assets rather than stocks and shares.

However, with a changing financial landscape, it’s worth considering how a portfolio of properties might best be managed.

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Author: Carl Shave - CEO and co-founder
Last updated: 26 May 2024

Who is a portfolio landlord?

As soon as you own more than one Buy-to-Let property, you could be regarded as a ‘portfolio landlord.’ This is someone who is making their income from rent charged to tenants living in a range of properties.

Although, the general consensus is that you should have four or more Buy-to-Let mortgages to be officially classified as such.

When applying for a Buy-to-Let mortgage, lenders may determine your status as a portfolio landlord in two ways: either via ‘sole applications’ or ‘joint (or more)’ applications.

If you own four or more mortgaged Buy-to-Let properties (including the one you are applying for), the lender will class you as a portfolio landlord. They will base their mortgage calculations on this property.

So what if you are applying with a partner, who may co-own some, or all, of your investment properties and perhaps others separately?

In this case, a lender will look at the loan-to-value ratio of the total number of properties in your portfolio. This includes the property you are applying for.

An introduction to Buy-to-Let Mortgages

Buy-to-Let topics

Whether you're investing in your first Buy-to-Let Mortgage or an experienced landlord, we can help.

Useful Information

What is a Buy-to-Let portfolio mortgage?

These mortgages are intended for those landlords who have – or who plan to have – more than one Buy-to-Let property.

Although a portfolio mortgage can incorporate several properties, it is treated as a single mortgage account by the lender. Rental income and the loan-to-value ratio are averaged out across the portfolio. This means any surplus may be leveraged to extend the portfolio.

Say, for example, the total value of the portfolio is £2.5 million, and the outstanding loan amount is £1.5 million.

Let’s also assume that the maximum loan-to-value ratio of the total portfolio is 75%. This means that you potentially have access to additional borrowing of £375,000. This capital can then be used to extend your portfolio.

Say you purchase a property worth £200,000, once it’s been added to your portfolio, you still have available credit of £325,000.

That is derived from a new total portfolio value of £2.7 million (£2.5 million plus the new property valued at £200,000) with an outstanding total loan amount of £1.7 million (the previous loan amount of £1.5 million plus the mortgage against the new property).

The more properties that are owned, the more any risk is spread. It becomes easier not only to draw on the revolving credit facility the portfolio mortgage offers, but also to accommodate periods when rental properties are untenanted. The overall income from the tenanted properties will make up any rent shortfalls.

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Portfolio mortgage lenders

In the past, if you were a portfolio landlord you would have had to go to a specialist.

However, in more recent times, investing in a Buy-to-Let property has become far more mainstream. With portfolio landlords being able to access mortgage products from lenders.

There’s now a huge range of products available from a wide variety of lenders. Each has their own rules, criteria for lending and methods of assessing a borrower’s suitability for a mortgage.

Doing your own research into every product on offer is a highly exhaustive and time-consuming task. In addition, the dynamic nature of the mortgage market means you’ll find that deals may disappear and/or interest rates will fluctuate.

Another factor to consider is your own circumstances as a portfolio landlord. The most suitable lender for you might vary according to:

  • Your experience.
  • Portfolio size.
  • Amount of equity in your portfolio.
  • Your cash flow.
  • Cash reserves.
  • The deposit you are able to supply.
  • Property location.
  • Size and condition of the property you want to buy.

Bearing all this in mind, it would be impractical to list what we consider to be the ‘best’ lenders.

Instead we suggest speaking to an experienced broker. Their knowledge of the market can help a lender to see your personal circumstances in the best light and therefore, increase your chances of being offered a competitive deal. If you want to discuss your options get in touch today for a free consultation.

Like with any type of mortgage, portfolio landlord mortgage rates change all the time. So, how do you make sure you get the most favourable deal?

There are a range of things you can do to improve your chances of getting offered a competitive rate. These include:

  • Providing a larger-than-average deposit. For a Buy-to-Let mortgage, this could be of the property’s value.
  • Consult a mortgage broker. They will be able to guide you to the right lender and deals based on your circumstances.
  • Have a good credit score. By having a good credit score, lenders will view you as less of a lending risk and may be more lenient.

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Portfolio Landlord Mortgages FAQs

There is actually no technical or legal limit to the number of mortgaged Buy-to-Let properties you can own. Any restrictions you might face will be down to your own personal financial circumstances.

However, most lenders will want to minimise their risk exposure. Therefore, they will put a limit on the number of properties they are willing to lend against. It’s also likely they will limit the number of mortgaged properties they want to see in your portfolio as a whole.

For example, a lender will perhaps provide mortgages for a maximum of five properties to any household, rather than individuals, to avoid multiple applications in the name of spouses or other family members. They may then set a maximum limit of ten mortgaged properties in a portfolio, with them and other lenders.

Of course, these limits and other criteria will vary from one lender to the next. If a lender allows more properties they might balance this with requiring more equity, a larger deposit, or by imposing a higher interest rate.

In September 2017, the government introduced more Buy-to-Let regulations. This set out more stringent rules for lending to portfolio landlords.

Lenders are required to run an analysis of the landlord’s whole portfolio as part of the lending process. This is to ensure that they’re not becoming over-committed.

Depending on the lender’s criteria, this analysis might also include a landlord’s other assets. Considerations like the property’s location, the landlord’s experience and other income sources will be looked at.

This is an effort to curb any higher-risk lending. Where banks lose money, landlords lose their business, and people lose their homes.

These regulations have led many lenders to place limits on the number of properties they are willing to lend against with any individual borrower (or their household).

You might want to remortgage one or multiple properties in your portfolio for a number of reasons. Some examples include:

  • To utilise the increase in value of the property, to raise capital to invest in another property.
  • To finance alterations or improvements to properties in your existing portfolio.
  • To consolidate your debts in other areas.
  • To simply take advantage of a better interest rate elsewhere.

The reason for remortgaging may have a bearing on how your remortgage application is treated by the lender.

If your aim is to make improvements, then most lenders are happy for you to do so.

If you are looking to use the cash to fund the deposit for a further property, then a lender will need to assess your overall exposure. It will likely cause an issue if you already have five mortgaged properties with them. Or if you have ten across various lenders in your portfolio.

Using a remortgage to consolidate debts can be a sensible decision. This is because the interest charged on a mortgage is usually lower than that for a loan. However, this may not be the case with a mortgage on a Buy-to-Let property. Many lenders may shy away from funding a release of equity for this purpose, as it is deemed a higher risk.

If you’re unsure about your remortgage options, reach out today.

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