It would be fair to describe the Buy-To-Let market in the UK to be experiencing a kind of resurgence of types. Landlords and investors, at one point, were considering pulling away from the buy-to-let market in large numbers, however, that seems to have changed markedly in recent years.
Despite a pandemic economy and a recession in 2020, the market rebounded to grow significantly throughout the year and beyond, and this has once again attracted landlords and investors back into the market.
It’s also thanks, in many ways, to the government making UK property a central plank of their economic strategy throughout the year which has meant that tax breaks, economic policy and focus have allowed things to flourish, with prices, rents and demand all growing along with yields too.
With that in mind, many landlords have actually been growing their property or investment portfolio over these past 12 months, and that’s meant that we’ve been getting a lot of queries about mortgage options for multiple properties, so we’ve put together a short guide for Buy To Let portfolio mortgages.
What is portfolio finance?
As opposed to a singular buy to let mortgage, this type of mortgage finance allows you to cover all of your properties if you have multiple investment properties. Rather than, say, having three different mortgages on three different properties with three different providers, you would bring them all under one umbrella, with one payment and one provider.
There are obvious advantages to this type of buy to let mortgage arrangement, rather than having multiple arrangements, and the main one is that it makes things much easier in terms of admin and organisation.
The portfolio of investment properties needs to be registered as a limited company and finances and accounts are filed as they would be with any other business. As a property investment company, a buy to let mortgage provider would expect a landlord to have a minimum of four properties to be eligible for a portfolio buy-to-let mortgage.
We work with the best portfolio mortgage lenders
Due to years in the industry we’ve managed to build a large and extensive portfolio of lenders and mortgage providers, many that you’re unable to access through traditional means or if you were to approach them individually. We work with banks, investors, pension schemes and other investment vehicles that simply aren’t available anywhere else, and we operate a preferred partner scheme with many of them meaning we can offer you exclusive rates and terms. If you’re looking for a portfolio mortgage, then there really isn’t anywhere else that can get access to such a wide variety of lenders.
In terms of the criteria that lenders will require you to meet, again this will vary depending on the finance provider, however, more generally you’ll be expected to meet a few conditions.
- Minimum 24 months experience as a landlord
- A maximum of about 10 mortgaged buy to let properties
- Maximum Loan to Value (LTV) across the portfolio of 75%
- Personal income not accepted
- Business plan required
Portfolio mortgage calculator
To give you a better idea of what getting this type of mortgage may entail, we’ve put together a calculator for you to play around with. It will allow you to change the rate, the length of repayment, the amount you want to borrow and the amount of your deposit. This will give you a good illustration of what to expect if you qualify for one of these mortgages.
Benefits of buy to let portfolio financing?
To give you a bit more information about why so many of our clients prefer to take out a portfolio mortgage rather than separate mortgages, we’ve put a list together of the main advantages to taking out buy-to-let mortgages of this kind:
Easier property management
It goes without saying that from a management perspective it’s much easier to manage your portfolio of properties when they’re all mortgaged with the same lender. It makes it easier to organise your finances, set a fixed rate for all of them, and to set fixed longer term payments so that there’s no nasty surprises. It also makes it easier for tax purposes and filing accounts as you’re not having to file receipts for multiple different finance arrangements.
Mortgage Tax Benefits
Some years ago, the government removed the tax benefits of being able to deduct mortgage interest from your tax returns. This, in turn, made running a portfolio more expensive and meant that a lot considered moving out of the buy to let market altogether, however, this only affects private landlords. As a business and limited company with a portfolio buy to let mortgage, you’re free to try and deduct the mortgage interest from your tax returns, however, it’s always worth consulting a property tax expert.
Extra support from mortgage lenders
Because you’ll be dealing with specialist mortgage lenders, they offer much more support in terms of helping you assess your portfolio moving forward, the general management and updating your finances. For example, as a company with a portfolio of more than 4 properties, you’ll be subject to a stress test which takes into account your experience, details of your existing mortgages, your assets and tax liabilities, your cash flow, and your income. They also offer advice and guidance.
Flexible mortgage terms
Because these types of mortgages that are buy to let are more complicated, lenders tend to offer fairly flexible terms to their borrowers to make them easier to manage and to be able to flex them around what you need and what you’d require. Many, for example, offer fixed rate mortgages for anywhere between 2 and 25 years. They also offer preferential terms depending on experience and your portfolio, and many will allow some early repayments, as well as allowing you to sell or add further properties down the line.
Bad credit considered for portfolio mortgages
One of the good things about mortgages for a buy to let portfolio is that, whilst important, your personal credit rating isn’t the most important thing in your application and, in fact, lenders are much more interested in the overall health of your property portfolio, their profits, rents and your performance as a landlord. If you’ve got adverse or bad credit on your credit history then fear not, lenders will still broadly consider you for their products and help you out.
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Are portfolio loans a good idea for landlords?
This will always depend, ultimately, on your own circumstances, however, broadly speaking it’s usually a good idea for landlords to bring all their investment properties into line with each other under the same lending portfolio.
It makes things easier, it’s more tax effective and it also means you pay a consistent rate (often less) across all your properties. It can also avoid disparities between the equity you hold across properties and bring them into line with each other.
Broadly speaking they are a good idea, but as always, we would always recommend you speak to a broker.
Documents we will need from the landlord
Of course, as with any financial application, there is some admin and paperwork you’ll need to complete. In order to be considered and accepted with your application, you’ll need some things.
- You’ll need to present your lenders with a business plan that outlines your current situation and what your plans are moving forward to maximise your profits, whether you intend to grow your portfolio, etc.
- Secondly, you’ll need to provide a property schedule, which is a breakdown of the properties you own, how much the rent is, what the maintenance costs are, etc.
- You may also need to provide proof of address, proof of ID and, also, proof of your income.
Portfolio mortgage rates
Of course, rates will vary between lenders, and it’s true that you’ll pay different rates depending on your experience, the size of your portfolio and what your income looks like. There are many different variables that can affect your rate, however, you should expect to pay somewhere between 1.5% and 5% per year.
Speak to our buy to let loan brokers today
Our brokers are highly experienced professionals with lots of experience in the industry ready and willing to help you out from the start of the process to the finish.
They can talk you through your portfolio and quickly get you an answer on what you may qualify for and what you’re eligible for, so why not pick up the phone or drop us an email?