We’ve been waiting months to provide you with details on exactly what lenders will require from portfolio landlords come October, and at long last two lenders have broken the silence…
As well as my birthday, October will bring changes to the way in which buy to let mortgage applications are underwritten for portfolio landlords.
By now, I’m sure you will have seen the definition of a ‘portfolio landlord’, but just in case you’ve missed it…
According to the Prudential Regulation Authority portfolio landlords are defined as:
“borrowers with four or more distinct mortgaged buy-to-let properties, either together or separately, in aggregate."
As mentioned, up until now we have been unable to provide you with details on exactly what lenders will require going forward, but finally we have an update for you.
The Mortgage Works was first to issue details and has advised that:
- It will continue to accept property portfolios of all sizes in personal names. (Limited company applicants will still not be considered).
- The Interest Cover Ratio (ICR) applied to all new applications will be based on 145% regardless of tax status. HMOs will be tested at a 170% ICR.
- All other product criteria (loan to values, loan sizes, income criteria) will remain the same… for now.
To process an application, in addition to the usual up-to-date proof of address and identification TMW will be asking to see:
- Your last three months’ bank statements (personal and rental) showing mortgage payments and rental income
- Proof of income:
- Employed – Latest P60 and latest three payslips
- Self-employed – Latest two years’ SA302s together with tax overview forms
- Up-to-date detailed information on your property portfolio including full address, value, outstanding mortgages, lender names, monthly payments and rental incomes. Some or all of these details will need to be validated.
And like a number 9 bus, you wait for ages and then two come along at once! No sooner had I finished my blog on TMW when Paragon Mortgages hit the wires with its initial thoughts…
Paragon does make a very valid point that it has always sought very detailed information (akin to TMW) from a client before underwriting, so in effect the rest of the market will be doing no more than Paragon has always done.
It has also made the point that whilst other lenders will spend longer validating this new additional information, its own systems are already in place and fairly robust.
Essentially, Paragon believes it is at an advantage as its processing systems are already up and running.
No doubt other lenders will have their own twist on the changes and of course we will let you know as soon as we have any further updates.
Whatever the case, it’s worth getting your paperwork up to date and in order sooner rather than later, particularly if you are coming to the end of your initial terms and looking at doing something about it now.
If you need any assistance you can call me on 01732 471607 or call the main broker hotline on 0345 345 6788.
You may also be interested in:
How the new PRA guidelines for portfolio landlords will affect you
3 reasons you should review your property portfolio now