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What is a Portfolio Mortgage?
If you are landlord with four or more Buy to Let properties, you are classed as a portfolio landlord in the eyes of a lender. This typically only includes Buy to Lets that you have finance on, and not properties that you have which are unencumbered. A portfolio mortgage is a loan designed for portfolio landlords. It allows you to group several of your Buy to Let properties all under one loan, meaning you only have one mortgage lender and one monthly mortgage payment for your properties, making it easier to manage your portfolio.
How does a Portfolio Mortgage Work?
A Portfolio Mortgage provides the opportunity to combine your buy-to-let property portfolio into a single loan.
This arrangement offers advantages in terms of simplifying financial management of your properties. With a Portfolio Mortgage, you typically manage just one monthly payment, and your lender gains a comprehensive view of all your investment properties, enhancing their understanding of your overall financial situation.
Like with any Buy to Let Mortgage, the lender will want to ensure that the rental income covers the mortgage payments. Lenders will conduct their own lender ‘stress test’ to ensure that the repayments will still be affordable in the event of any rental voids. When taking out a Portfolio Mortgage, lenders will conduct their ‘stress test’ amongst the properties combined, meaning that higher-performing properties can help offset against properties achieving a low rental yield.
These mortgages are commonly provided by specialist lenders equipped to handle more complex cases and provide tailored financial solutions, meaning that the terms of the mortgage can vary greatly from lender to lender.
Can I add properties to my Portfolio Mortgage?
Expanding your Buy-to-Let Portfolio Mortgage to include additional properties depends on certain factors such as the overall financial strength of your existing portfolio and the income potential of the property you intend to acquire.
When considering the addition of a new property, your lender will perform a ‘stress test’ to evaluate whether the combined income from your entire portfolio, including the new property, can endure adverse financial conditions or market fluctuations.
Whilst the majority of lenders do allow you to add additional properties to the portfolio mortgage, lenders terms do vary. If you plan on getting additional Buy to Lets in the future, it will depend on the individual lender as to whether or not they will allow you to add it to the Portfolio Mortgage.
Can I sell a property once I have a Portfolio Mortgage?
If you intend on selling a property tied within a Portfolio Mortgage, you would need to inform the lender. Typically, they will check to see if the remaining properties in the portfolio will still pass their stress test and if they don’t, you may be required to transfer the remaining properties onto alternative mortgage products.
Are there other advantages of having a Portfolio Mortgage?
Portfolio Mortgages can work out more cost effective than getting each individual Buy to Let on their own mortgage. The rates offered by the lenders are often more competitive and the cost of conveyancing and mortgage advice fees are likely to be less, due to you only needing one application for multiple properties.
In addition, it may be easier to release equity from your portfolio to finance further purchases as you can release equity spread across several properties, rather than a single Buy to Let.
What Information do I need to provide for a Buy to Let Portfolio Mortgage?
Generally speaking, in order to be assessed for a Buy to Let Portfolio Mortgage, you will be required to provide all the same documentation and evidence as you would for a standard Buy to Let Mortgage. This includes proof of ID, business and personal bank statements, proof of income, details of the property you are buying and a credit search.
However, for a Buy to Let Portfolio Mortgage, you are likely to be also asked to provide the following:
• A full and complete property schedule which includes details of all your properties such as addresses, current mortgage details, details of and rental agreements you have in place, purchase price and current valuation.
• A business plan detailing next steps for your property investment journey.
• A statement of assets and liabilities
Can I transfer my portfolio into a Limited Company?
Unfortunately, a limited company is classed as a separate legal entity and therefore you can’t simply transfer your portfolio over. Potentially, your limited company could buy the portfolio from you but you would face all the usual costs involved with a sale and purchase, such as stamp duty, legal fees and any other lender fees. Always seek advice from a professional such as a property tax specialist before making any decisions.
If you would like help in simplifying your portfolio, get in touch with our expert team who will search the market to find you the most suitable deal available.