Once you have four or more Buy to Let properties, you’re seen as a portfolio landlord. That gives you more mortgage options, as we explain in this guide.
What is a Portfolio Mortgage?
A portfolio mortgage is a way to finance two or more properties with the same lender. It is a simpler way to manage your borrowing, as you will only have one mortgage to pay and a single monthly repayment.
It’s also an opportunity to raise money against existing Buy to Let properties to invest in more homes and expand your portfolio further.
Who can get a portfolio loan mortgage?
Portfolio mortgages are generally tailored by the lender to each client, based on your specific circumstances. To qualify, you will usually need to demonstrate your experience as a successful landlord. Some lenders will require you to have been running Buy to Let properties for a certain number of years and a common requirement is for a portfolio to be valued at at least £500,000 in total.
As with most mortgages, each lender has its own criteria, so talking to a broker is the best way to find a mortgage lender to match your situation.
All lenders will do a ‘stress test’ on your portfolios, looking at the size of the mortgages on them, the rent that they generate and what could happen if interest rates increase. To allow for that, the rental income generated will need to be around 120%-140% of the loan repayments
Advantages of Portfolio Mortgages
Some of the reasons why landlords choose portfolio mortgages include:
Tax efficiency – it can be tax efficient to retain funds in your portfolio, as withdrawing money incurs tax. By using your equity in the properties to renovate or purchase additional properties you could potentially reduce your tax, as these outgoings are classed as expenses.
Buy without a cash deposit – Landlords can borrow against the equity they have across the entire portfolio. If you have a low overall Loan to Value of less than 50%, for example, you can borrow additional funds from your lender without a cash deposit. That way you can buy new properties to expand your portfolio.
Simplified finances – Instead of multiple mortgages across various lenders, a portfolio mortgage gives you a single lender and one monthly payment. That reduces the need to keep an eye on various different mortgages and prevents you losing track of when each deal is ending. A late remortgage could mean you end up on an expensive standard variable rate.
Compensate for underperforming properties – Sometimes one or more properties in a portfolio don’t generate as much profit as others. Lenders can see these underperforming properties as liabilities, but by keeping a portfolio under one mortgage, stronger properties can compensate for weaker ones. That puts you in a better financial position overall.
Flexibility – you don’t have to put all your properties with a single lender. If you have a sizable portfolio, you could have a number of portfolio mortgages. Many landlords prefer not to have all their eggs in one basket.
Disadvantages of Portfolio Mortgages
You may find that portfolio mortgages have higher rates and fees than individual Buy to Let mortgages – you are exchanging simplicity for higher costs.
Generally, portfolio mortgages are for landlords who operate limited companies. If your business is not set up that way, it can be costly to make the change.
A final potential disadvantage is that a portfolio mortgage is a single, rigid monthly cost. If you have a challenging month where your spending is high, making that large payment can be more challenging than funding several lower ones spread over different dates.
How to get a portfolio loan mortgage
Find out how a portfolio mortgage could work for you with advice from an experienced broker. This is a specialist form of mortgage where we will need to explore your situation and carefully package up your case for a lender to consider.
Every landlord is different and so is their portfolio – we’ll give you tailored advice and long term support to help you get the best possible results from your property investments.
The Financial Conduct Authority does not regulate some Buy to Let Mortgages
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foresee
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