Mortgages for UK portfolio holders


A portfolio landlord is a borrower with four or more distinct mortgaged Buy to Let UK rental properties (or seven or more for re-mortgage applications without capital raising).

This includes holiday lets, properties owned through a limited company, ‘consent to let’ properties and all BTL mortgages owned solely or jointly by the applicant(s).

Most lenders will only accept applications from portfolio landlords that have at least two years' letting experience (at least one applicant must meet this requirement on joint applications). Lenders won’t consider foreign properties when assessing portfolio landlords.

We can secure mortgages on most Single Self Contained Units, HMOs and Multi Block Units too.

Mortgage lenders have designed a product known as a buy to let portfolio mortgage loan which allow landlords to better manage their property portfolios. This type of mortgage is relatively niche, but can make a real difference to landlords who own, or are likely to own, more than one buy to let property

Once an investor has successfully purchased and managed one buy to let property, the natural progression is to consider an additional property or properties to create a portfolio. Whilst it is true that the lessons learnt from the first property will make the process of growing a portfolio easier and quicker, knowing how, when and why to grow a portfolio, nevertheless, requires a totally new set of skills.

The Buy to Let mortgage portfolio is treated as a single account – Although the mortgage portfolio can incorporate a variety of interest rates, it is treated as a single mortgage account regardless of the number of buy to let portfolio properties. This means one direct debit mandate, one monthly payment and one mortgage statement for the entire buy to let mortgage / property portfolio.

It is a common arrangement that professional property investors utilise for a number of reasons. The concept is simple in that a lender will treat the loan as one agreement rather than a number of separate loans on individual properties. The lender will also offer a revolving credit facility up to the unused portion of the available equity.

For example, if the total portfolio was worth £2 million and the loan outstanding is £1.3 million, a credit facility of up to £300,000 could be available to take the total loan to 80% of value.

This is useful for an investor who wants to make bids on properties without having to make an application for additional finance each time. The newly purchased property is then added to the portfolio which increases the credit facility once again.

Lenders will usually look at portfolios of between £500,000 and £10 million and will expect rental income to be in the region of 130% of the loan repayments. The interest rate charged will often be more competitive than rates on smaller individual loans.

Because rental income and loan to value is averaged across the mortgage portfolio, you can take advantage of any excess rental income or equity to support the purchase of other properties for their portfolio. Take a look at the next 2 images that will try to explain how BTL portfolio lending can work;

You can use Buy to let Portfolio lending to use equity of other properties in the portfolio to effectively purchase a new portfolio property with no deposit in effect a 100% BTL mortgage!!

The more properties that an investor owns, the easier it is to spread risk and to manage unforeseen circumstances. If you have an average void of 7 percent a year then, on average, you will have 25.5 days when the property is empty and no rent is being obtained. Consider a portfolio of 10 properties, each bringing in £600 a month. If the mortgage payments on all 10 properties are £450 each a month, it is possible that one property can be empty without the portfolio making any loss.

For example, monthly income is £6,000 and the monthly outgoings are £4,500. If one property is empty in any given month, the income from the portfolio becomes £5,400 and the monthly outgoings remain at £4,500. Although the profit is reduced, it is easy to see how a larger portfolio allows an investor to smooth the effect of unexpected costs and void periods.

You can also use the portfolio to offset poor rentals, ie it may be a property that you desperatly want to buy – but the mortgage valuers rental figure is too low to justify the mortgage – you can spread the risk across the rest of your BTL portfolio to boost the amount that can be borrowed.

Buy To Let Mortgages – Portfolio mortgages ( BTL Portfolio Mortgages ) are NOT regulated by the Financial Services Authority as they are regarded as a commercial investment transaction.

The mortgage valuation will include an estimate of the rental income of your chosen property on an unfurnished basis. Buy to Let can be a huge investment and like all types of investment it carries some risks. Our Mortgage Advisers can help you understand the financial commitments involved, but can’t offer you advice on whether this type of investment is right for you based on your individual financial circumstances. Please remember there are no guarantees as to what rental income your Buy to Let property will generate and whether it will rise in value over the years.

We can only advise on the mortgages it offers. We cannot offer advice on whether Buy to Let is the right form of investment for you. Please remember you will still have to pay any Buy To Let Mortgage payment whether the property is rented out or not.

Buy to let portfolio mortgages are of advantage to some landlords because they allow landlords to borrow above the value of an individual property – very useful for home improvements and decorating. They also mean that rental income and loan to value levels are averaged out across the whole portfolio of mortgage loans, allowing landlords to take advantage if rental income exceeds expectations.

When a borrower takes out a buy to let portfolio mortgage, it can incorporate several different interest rates, or many if the portfolio is large enough. The loans are treated as a single account however many buy to let properties are included. There is, therefore, only one direct debit, one monthly payment, and one mortgage statement for the entire portfolio.

This really is a personal choice and depends on the finances available and the time factor involved in sourcing a new property. Contact your lender and ask whether they will be prepared to advance you further cash, as this is likely to be the deciding factor. Generally, it is worth waiting at least one year. This is because you will then have dealt with most aspects of managing your original property, you will have gained a reputation with your lender of being a solid investor and it is possible that your original property will have gained sufficient capital value to allow for re-mortgaging which can be used to fund all or part of the next deposit.

One of the best ways of hedging your bets as a landlord is to spread your risk across several different markets. For example, if you currently have a professional flat for rent, why not add a student let, because these two properties will not suffer from the same fluctuations and are, therefore, much more likely to assist in the smoothing of any unpredicted costs.

Most BTL mortgages are arranged on an interest only basis, this is because the landlord can deduct the interest only portion of the buy to let mortgage as a deductable expense before declaring for income tax purposes.

UAE Refinance Mortgage

Why utilise a broker?


A mortgage is often the biggest financial commitment of a person's life. Normally we seek advice from doctors, lawyers and accountants without questioning the need for their services, why should you take a risk trying to source a mortgage by yourself without the help of a mortgage adviser. Here at Casa Capital we have access to all lending banks in the UK in the Portfolio lending space, meaning access to hundreds of mortgage products and solutions. Although most clients are very rate driven, there are many other factors that need to be taken into consideration when sourcing a mortgage.

Finding the right mortgage for portfolio borrowers?


There are three steps to finding the right mortgage for any client:

Understand

The first step in the process is to undertake a call or meeting with you where we will conduct a full fact find to understand your requirements further.

Analyse

The second step is for us to analyse the information we have gathered in order to start filtering out the banks that are not applicable.

Recommend

Based on the information we have collected, the research we have undertaken and the analysis of the products available we will then make a recommendation.

Types of Portfolio mortgages available


There are an abundance of products and choices available in the UK market. Some banks will offer discounted fees directly to brokers and offer products not avialable through high street lenders or comparison sites.

Some banks and institutions will offer the ability to make overpayments free of charge and some even allow you to exit or pay off the mortgage without cost, however no single bank does it all!

In an ideal world it would be great to have a bank offer the lowest rate, the lowest costs and charges, however where a lender appears great in one aspect it could be less appealing in another. That is why it is very important to understand all of your requirements fully before making a recommendation. There is no point in recommending a low rate that comes with mandatory salary transfer if you are unable to transfer salary due to other loan commitments as an example!

The main types of mortgage when you consider rate are as follows:

FIXED

A fixed rate mortgage is where the bank fixes the interest rate for between 1 and 5 years which protects the rate against fluctuation in the BOE Base rate or the LIBOR rate (depending on the bank).

TRACKER

This type of rate consists of a fixed margin stipulated by the bank plus the prevailing BOE Base rate or LIBOR rate which changes daily (although most banks use a 3 month rolling average rate). If you believe rates will decline then tracker type products are normally a good option.

VARIABLE

Some banks will offer a variable rate, an internal rate which is set by various internal departments within the institution. Although variable rates are no overly transparent, they can sometimes be cheaper than fixed rates.

Why not call us for a no obligation consultation to find out more