Greg Cunnington, Director of Lender Relationships and New Homes at Alexander Hall, looks at how the Buy to Let mortgage market has changed for our portfolio landlords.
There have been several changes in regulation over the last two years that have had large implications for portfolio landlords, particularly from a mortgage and taxation perspective.
Income tax changes for rental income, along with the phasing out of the mortgage interest against profitability, have meant that landlords are feeling the pressure.
A recent survey in Kent Reliance’s Buy to Let in Britain report for 2018 showed that 34% of property owners are concerned about the ability to secure new deals when they re-mortgage if they want to expand their portfolio.
In September 2017 regulation was introduced meaning that landlords with four or more mortgaged properties (privately or company owned) are now classed as ‘portfolio landlords’ and are subject to new, more detailed mortgage underwriting assessment by lenders.
Lenders will now require:
- A business plan document. This will include: the reason behind having a property portfolio – i.e. is it for capital appreciation, income generation or pension provision; the year the property owners began expanding their portfolio; plans for their properties in the coming years; the professionals they use to help manage their portfolio, and their strategy to cover potential void periods
- A spreadsheet of the portfolio details, including type of property, rental earnings and the start and end dates of the existing tenancies
- The tenancy agreement for all properties in the portfolio
- Up-to-date sales valuations and current rental yields
Each lender has their own interpretation of the portfolio regulation and they all differ on how they assess risk on background properties. A portfolio landlord who wants to refinance would most likely find 10 significantly varying loan amount offerings if they approached 10 different lenders!
Attractive new options
So what can they do? Landlords should speak with a qualified mortgage advisor who specialises in this sector to help navigate the maze of options available. The good news for landlords is that the number of Buy to Let mortgage products in the market has increased by 50% in the last two years, opening up some very attractive options.
"...the number of Buy to Let mortgage products in the market has increased by 50% in the last two years"
Despite the complexities, with the right mortgage advisor, there are exclusive and ‘broker-only’ lenders that will create bespoke options for their clients. One of the popular options for our experienced landlords is the lenders that only have to underwrite the portfolio once. As a result, any new applications in the following 6 months would only require a valuation on the new property without assessing the whole portfolio again and going through the entire underwriting process. Far less paperwork!
This is a much less stressful and time-consuming solution for many of our portfolio landlords.
Mortgage advisers who have access to all the lenders that specialise in this area, and who have strong relationships with the underwriters (decision-makers) from these lenders, will ensure the most competitive and suitable products are secured in the quickest possible time.
In a transient and complex marketplace, portfolio landlords will increasingly be seeking a second opinion to ensure they are accessing the best possible solution. Don't hesitate to get in touch with us at Alexander Hall to arrange a free consultation and discuss your options free of charge.