18/04/2018

Handling portfolio landlord mortgage applications needn’t be overly complex

Author:
Chris Maggs
Commercial Manager
Accord Buy To Let

In September 2017 the Prudential Regulation Authority (PRA) formally provided a definition for ‘portfolio landlords’ which became subject to additional lending criteria from lenders.

A landlord is considered a portfolio landlord when they either have, or will have, four or more mortgaged buy-to-let properties at the time of completion of a mortgage application. Lenders will generally include ‘in-flight’ applications with other lenders, in other words applications for buy-to-let mortgages being submitted to other lenders simultaneously.

Lenders need to fully understand the landlord’s financial position and look at the affordability of not only the new mortgage applied for but the background portfolio as well. The lender needs to demonstrate they have also considered the likelihood of future borrowing and the assets of the landlord.

At Accord we have always offered mortgages to portfolio landlords accepting up to 15 properties, of which no more than 10 should be mortgaged. With the introduction of portfolio landlords as a categorisation by the PRA we endeavoured to ensure our criteria was transparent and not overly onerous for the broker.

In summary we consider:

  • A portfolio landlord as someone who at the time of completion of the new mortgage will have four or more mortgaged buy-to-let properties to include any inflight applications currently in process with other lenders.
  • The background portfolio must meet 135% interest coverage ratio at a stress rate of 5%. Rental income from unencumbered properties can be included in the calculation. In flight applications are excluded from the calculation.
  • Where the landlord declared in-flight applications these will be considered as part of the underwriter assessment process to ensure they don’t have a detrimental effect on the overall affordability of the background portfolio.
  • An assets statement is required detailing a landlords savings and the underwriter will use this to support the application in particular where savings exist which could help to support a rental void period.
  • Finally, we ask whether the landlord has any future financial plans which could impact the affordability of the mortgage.

With portfolio cases we have no restrictions on loan-to-value (LTV) with our focus being primarily on affordability of the portfolio. We believe our process to be straightforward but should brokers require additional support they can contact our team at Accord Sales for further assistance.