Have you been declined finance due to the gearing on your background portfolio? Gavin Richardson Head of Sales highlights a mortgage product which has proven extremely popular with portfolio landlords facing this problem…
Since the PRA’s new guidelines were introduced in 2017, many of you will have noticed that securing finance isn’t quite as easy as it was before – especially if you are portfolio landlord borrowing personally.
First, we had the introduction of stricter rent to interest calculations, which decreased the amount a landlord could borrow (unless borrowing via a Ltd Co). Then we had the introduction of stricter underwriting for portfolio landlords.
An example of how the stricter rent to interest calculations have affected how much a landlord can borrow:
In 2016 you could’ve expected to borrow at a rate of 125% @ 5%
Annual rental income: £12,000 / 5% = £240k / 125% = £192,000 (max loan amount)
In 2018 you could expect to borrow at a rate of 145% @ 5.5%
Annual rental income: £12,000 / 5.5% = £218,182k / 145% = £150,470 (max loan amount)
As you can see, the amount you could borrow has decreased drastically.
If you’re a portfolio landlord there are also additional checks and affordability calculations in place. Not only will lenders apply the new rent to interest calculations to the property you are looking to purchase/refinance, but most will also stress test all or a portion of your existing portfolio using the same calculation.
This means that if your existing properties don’t meet the affordability requirements it is highly likely that your new borrowing will be declined – regardless of how the calculations stack up on the new borrowing.
Don’t panic. There are solutions out there but do bear in mind that the cheapest rates may no longer provide the best lending solution...
A handful of lenders don’t impose the same stress tests on background portfolios, instead they just want to ensure that the properties within your portfolio our covering the mortgage repayments and that they don’t exceed the loan to value criteria.
An intermediary only lender is currently offering a very competitive rate to landlords facing this difficulty…
Rate: 3.19% (4.8% APR) 5 year fixed to 65% LTV*
- No limit on the number of BTL mortgages with other lenders
- No limit on the number of properties held in a portfolio
- Full-time landlords accepted
- RTI: 145% @ 3.19%
Many of our clients have already benefited from this great deal, so if you would like more information on this rate or if you would like to know what other options there are for portfolio landlords struggling to make a purchase/refinance property, please do give us a call.
You can call the mainline on: 0345 345 6788