Portfolio landlord mortgages
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Portfolio landlord mortgages
There are various ways to build long-term wealth but, for many keen investors, building a strong property portfolio is the most appealing. However, you can’t simply build up an impressive bank of properties, taking out buy-to-let mortgages on each, and continually add to your portfolio. Eventually, you’ll reach the number of mortgaged buy-to-let properties that change the rules of lending, and lenders will start to look at you differently. If you’re approaching four or more mortgaged rental properties, you’ll be classed as a portfolio landlord. When this happens, lenders begin to assess your entire portfolio, rather than just the individual property you’re buying. This means the right advice and the right lender become more important than ever.
At Everest Mortgages, we specialise in helping landlords and investors to secure competitive portfolio landlord mortgages, even when your portfolio becomes more complex.
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What is a portfolio landlord?
If you own four or more buy-to-let properties with outstanding mortgages, you’re classed as being a portfolio landlord. This doesn’t include properties owned outright, holiday homes or residential properties, or properties without a mortgage on them. Once you pass the property threshold and become a portfolio landlord, lenders start to treat you differently.
The rules are less strict for borrowing, and your personal income is less important. Lenders start to view you as having more of a business structure, and therefore they want to see that the rental income supports the portfolio. Lenders will put a lot more emphasis on your overall financial position as a business landlord, rather than an individual borrower.
What is a portfolio landlord mortgage?
A portfolio landlord mortgage allows you to finance multiple buy-to-let properties under one mortgage. Instead of having a separate mortgage and a separate lender for each of your rental properties, you can combine everything into one portfolio landlord mortgage. You swap multiple payments, rates and renewals, for one loan, one monthly payment and one lender.
The benefits of a portfolio landlord mortgage
- You only have to deal with one interest rate across multiple properties
- You can enjoy simplified admin and renewals
- They work well for larger and more complex portfolios
- You might have higher borrowing capacity
- You can offset strong properties against weaker ones
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How lenders assess portfolio landlords
When you apply for another buy-to-let mortgage, lenders don’t just look at the new property that you’re purchasing. They review your entire portfolio to ensure that every property is financially sustainable, and adding another into the mix won’t derail that. The key metric they use is the Interest Coverage Ratio (ICR).
What is ICR?
ICR measures how comfortably your rental income covers your mortgage payments. For portfolio landlords, lenders usually expect your rental income to cover between 125% and 145% of your monthly payments. This is calculated at a stress rate – this tends to be around 5% to 6.5% depending on lender and tax status – and assessed across your full property portfolio, not just the property being purchased.
ICR means if one property is falling short, it could drag down the affordability of the whole application, having a knock-on effect on your future investments. If any property is underperforming, lenders will want to understand why, and how you plan to fix it.
What else do portfolio landlord lenders look at?
Lenders offering portfolio landlord mortgages all have their own set of rules, but there’s a handful of common things they all commonly look at.
Landlord experience
Many lenders require you to have a fair amount of landlord experience, with many requesting at least 12 months. If you’re looking to use a portfolio landlord mortgage to buy HMOs, MUBs or holiday lets, you might face stricter criteria.
Property types in your portfolio
Some lenders are flexible, and are open to different property types within your portfolio. However, others restrict HMOs, MUBs and holiday lets. This is why it’s important to get help from a mortgage broker, such as Everest Mortgages, who can match you with lenders who are happy with your property mix.
Loan-to-value (LTV) limits
Most portfolio landlord mortgages have a maximum LTV of around 75%, though some lenders require lower. Some lenders assess LTV per property, others look at the average LTV across your portfolio.
Maximum number of properties
The number of properties in your portfolio will also be factored in, as some lenders cap the number at 10, 20 or 25. There are specialist portfolio landlord lenders who don’t have a maximum, and we can help you to find them.
Joint portfolio rules
If you’re buying a property with another person, you might be classed as a portfolio landlord sooner than you thought. Lenders will look at all of the properties you own collectively, as well as those owned individually by each applicant.
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Who can get a portfolio landlord mortgage?
Lenders will allow you to have 10 to 15 mortgaged properties without you needing to apply for a portfolio mortgage, but things get complicated if you have any more than that, and some won’t approve you for a buy-to-let mortgage if you have a complex portfolio.
However, specialist buy-to-let lenders embrace portfolio landlord mortgages. They understand rental income, accept more complex portfolio structures and offer mortgage products designed specifically for professional landlords.
At Everest Mortgages, we know that portfolio lending can become complex quickly, particularly when you’re dealing with different lenders, mixed property types or varying performance across your investments. But, working with our mortgage broker experts and securing the right portfolio landlord mortgage can simplify things. Whether you’re adding one more rental property into the mix, or you’re refinancing your entire portfolio, we make the process smooth, compliant and cost-effective.
Frequently asked questions
When do I start being classed as a portfolio landlord?
Lenders will start classing you as a portfolio landlord when you have four or more mortgaged buy-to-let properties.
Do all lenders accept portfolio landlords?
No, not all lenders provide portfolio landlord mortgages. For example, many high street banks don’t, but there are specialist lenders that do. At Everest Mortgages, we can help you to find the right lender for you.
Does having HMOs or MUBs affect my chances of being approved?
Sometimes, but not always. It depends on the lender you’re working with. Some lenders restrict HMOs and MUBs, but others are happy to support complex property types and unique property mixes.
Do mortgage-free properties count towards the portfolio landlord threshold?
No, they don’t count towards the property threshold, but they may still be included in affordability assessments.
Do lenders assess every property in my portfolio?
Yes, they do. Once you’re classed as a portfolio landlord, lenders request information about all of your properties. This includes information on mortgages, rental income, values and running costs.
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