Yes, you’re right, from October 2017 the PRA requires buy to let lenders to apply a “specialist” underwriting approach when assessing loan applications from portfolio landlords. The PRA defines a portfolio landlord as a person with four or more distinct, mortgaged buy to properties, either together or separately, in aggregate. This rule applies regardless of whether the borrower owns the properties personally or in a corporate structure (i.e. a limited company).
In practice, what this means is that all buy to let lenders will be looking much more closely when assessing mortgage applications. If you are (or will be) a portfolio landlord it means that you will have to provide much more information that you might have done previously. Lenders will want to look at how you operate and the borrowing on your entire portfolio, plus any other income, expenditure, assets and liabilities you have. They may even ask for a business plan.
The upshot is that the mortgage application process could take a bit longer and the industry may experience a log jam as lenders get to grips with the rules. We’ve even seen some portfolio landlords bring forward their financing plans in an attempt to avoid potential delays and stricter underwriting.
In this regard, we’ve been working hard to create some tools to help landlords prepare for the new requirements, including a checklist to ensure that you have all the necessary paperwork and information sorted before applying for a mortgage. Head over to our website for more information.
Update on the PRA's new underwriting rules for portfolio landlords
The next raft of PRA (Prudential Regulation Authority) or Painfully Robust Administration changes are almost upon us as Chris Longhurst, consultant mortgage broker, explains.
Portfolio Landlords' Checklist
Steve Olejnik describes what lenders are likely to require from portfolio landlord borrowers after the implementing the next phase of PRA guidelines.