A portfolio landlord, as outlined by the Prudential Regulation Authority (PRA), is a landlord that owns four or more mortgaged properties, either through a limited company or on a private basis.
It’s important to note that unencumbered properties do not count, so if for example a landlord had six rental properties, four that were owned outright and two that had a buy-to-let mortgage, the landlord would not be a portfolio landlord.
Whereas a landlord with four rental properties, all with a buy-to-let mortgage, would be classed as a portfolio landlord.
There are specially designed portfolio mortgages which enables a landlord to group all of their investment properties together, under one single loan.
This means the landlord will only need to pay one monthly repayment instead of multiple payments.
Having a portfolio mortgage has the potential to be cheaper overall due to the fee structure.
Some lenders adopt a process called ‘top slicing’, which means the lender will take into account the personal income of the landlord – away from the portfolio - in the affordability assessment.
This particular approach is useful when there is a shortfall in the rental income.
The maximum number of properties in a landlord’s portfolio will vary from lender to lender.
Ten properties is a fairly common restriction however some lenders, particularly specialist lenders like West One, will offer a more flexible approach and instead of a maximum number will stipulate that the Interest Cover Ratio (ICR) from every property within the landlords portfolio is above 100%.
In September 2016, a number of new underwriting rules were introduced by the PRA to ensure stricter affordability tests and extra checks on portfolio landlord mortgages.
As a result, lenders require more paperwork at the application stage to make a decision.
As with any rental property, building insurance is usually a requirement of the mortgage.
In addition, portfolio landlords can consider portfolio insurance, which is one policy to cover the multiple properties within a portfolio, rather than having a separate policy for each property.
While it is most definitely possible to obtain a portfolio mortgage with impaired credit, the number of lenders that are comfortable doing so will vary.
Generally, a specialist lender, like West One, will take a more flexible approach and take the time to understand the circumstances surrounding the credit issue.
The lender will be trying to understand if it was a one off, or if there are likely to be further defaults on payments in the future.
• Portfolio lending up to £15m per borrower – more than 20 applications or £3m lending by referral
• Leasehold Block exposure to 20 units with up to 100% exposure possible - over 20 by referral
• No background portfolio stress test
• Additional verification (like E-Tech or EDM) is not required
• Great turnaround times from enquiry to application and offer
• Limited company lending with no rate loading
• Fast-track remortgage options to speed up completions
• No minimum income requirements