The Prudential Regulatory Authority (PRA) issued Underwriting Standards for BTL mortgage contracts in September 2016. These Standards require lenders to implement a specific underwriting treatment for Portfolio Landlords from 30th September 2017.
This means lenders will consider not just the individual transaction, but the overall customer portfolio position as well.
A Portfolio Landlord application is where the customers will have 4 or more mortgaged BTL properties including the new transaction. This is based on the total number held by all customers party to the application.
For example, let’s say that you are entering into a joint venture with another investor. You (applicant 1) have 2 mortgaged BTL properties and applicant 2 (the JV partner) has 1 mortgaged BTL property – you are buying a new property together and so have 4 in total and the application will be classified as a Portfolio Landlord by most lenders.
Mortgaged BTL properties include those held in a personal name, Limited Company or any other legal entity.
When assessing a new application for a portfolio landlord, lenders will now require:
- Clear business plan
- Cash Flow Forecast
- Assets and Liabilities Statement
Furthermore, they will look at the concentration of properties, your remaining equity and they will conduct a stress test across the portfolio.
What this will mean to Portfolio Landlords is sourcing the right deal may prove to be more difficult, if they haven’t reviewed their mortgage position with the recent changes. We expect the application process to slow down, in the short term, while the lenders get up to speed with the additional paperwork.
It’s important to remember that having one rotten apple within the portfolio could have an impact on a lending decision, whether it’s highly geared or doesn’t meet the new lenders stress test. Our advice would be to sit down with a specialist mortgage advisor to review your portfolio and to see what borrowing will be available to you.