Portfolio Landlord Mortgage Guide

Mortgages for Landlords With Multiple Buy to Let Properties

As a property portfolio grows, arranging a mortgage can become more complex.

A landlord purchasing their first rental property may only need to demonstrate that the proposed property and their personal circumstances satisfy the lender's criteria.

For a landlord with several mortgaged rental properties, the lender may want to understand the whole portfolio, not simply the property being purchased or remortgaged.

This can mean providing details of existing properties, mortgage balances, rental income, loan-to-values and other financial commitments.

Different lenders also take different approaches to portfolio landlords.

Understanding these requirements before making another purchase or approaching a remortgage can make the financing process much more straightforward.

What Is a Portfolio Landlord?

In mortgage lending, the term portfolio landlord is generally used for landlords with multiple mortgaged Buy to Let properties.

The precise way a lender applies its portfolio criteria can vary.

The important distinction is that once you fall within a lender's portfolio landlord definition, the lender may assess both:

the individual property being financed, and
your wider property portfolio.

This can make underwriting more detailed than it would be for a landlord with only one or two rental properties.

Why Do Lenders Treat Portfolio Landlords Differently?

Owning several mortgaged properties creates a different financial profile from owning a single rental property.

A lender may want to understand the amount of borrowing across the portfolio and how well the rental properties support that borrowing.

For example, a lender may consider:

• total portfolio value;

• total outstanding mortgage debt;

• rental income across the portfolio;

• monthly mortgage commitments;

• loan-to-values;

• property types;

• ownership structures;

• personal income;

• credit history; and

• the landlord's experience.

The lender is trying to understand the wider financial position rather than looking at the new mortgage in isolation.

What Is Portfolio Underwriting?

Portfolio underwriting is the process of assessing the landlord's existing property portfolio alongside the mortgage being applied for.

Imagine that you are purchasing another rental property.

The new property may have a strong rental income and a substantial deposit.

On its own, it might comfortably satisfy the lender's standard Buy to Let affordability requirements.

However, the lender may also examine the other mortgaged rental properties you already own.

If those properties are highly leveraged or their rental income is relatively low compared with their mortgage commitments, this could influence the lender's decision.

The strength of the new property does not necessarily remove the need for the existing portfolio to meet the lender's requirements.

What Information Will a Portfolio Landlord Need to Provide?

Portfolio landlords should expect to provide more information than may be required for a straightforward Buy to Let application.

A lender may request a property schedule containing information about existing rental properties.

This can include:

• property addresses;

• estimated property values;

• outstanding mortgage balances;

• current lenders;

• monthly mortgage payments;

• monthly rental income;

• ownership structure;

• mortgage repayment type;

• property type; and

• other information relevant to the portfolio.

The exact requirements depend on the lender.

Keeping accurate property and mortgage records can make future applications considerably easier.

What Is a Property Portfolio Schedule?

A portfolio schedule is essentially a summary of the properties you own.

It gives the lender a clearer picture of your overall property investment position.

For each property, the schedule may include information such as:

Property value – the estimated current value of the property.

Mortgage balance – how much remains outstanding.

Monthly rent – the current rental income.

Monthly mortgage payment – the amount currently being paid.

Lender – which mortgage provider holds the existing loan.

Ownership – whether the property is held personally, jointly or through a company.

A well-maintained portfolio schedule can become particularly valuable as the number of properties increases.

How Is Portfolio Loan-to-Value Calculated?

Loan-to-value, or LTV, compares mortgage borrowing with property value.

For an individual property, the calculation is relatively straightforward.

If a property is worth £200,000 and has a £150,000 mortgage, its LTV is 75%.

For a portfolio landlord, a lender may also consider the overall position across multiple properties.

For example, imagine a landlord owns several properties worth a combined £1 million with total mortgages of £600,000.

The overall portfolio borrowing would represent 60% of the combined property value.

This simplified example illustrates the principle, but lenders can have their own methods and criteria when assessing portfolio exposure.

Does Every Property Need to Pass a Rental Stress Test?

This depends on the lender.

Some lenders may assess individual properties within the portfolio, while others may also consider the overall rental position across the portfolio.

The lender may examine whether the rental income provides sufficient coverage for the associated mortgage borrowing.

Different lenders can use different:

• rental stress rates;

• Interest Coverage Ratios;

• portfolio calculations;

• loan-to-value limits; and

• affordability methodologies.

This is one reason a portfolio may satisfy one lender's requirements but not another's.

What Is an Interest Coverage Ratio?

An Interest Coverage Ratio, commonly referred to as ICR, is used by many Buy to Let lenders when assessing whether rental income provides sufficient coverage for mortgage borrowing.

The lender generally wants the rental income to exceed the mortgage interest figure used in its calculation by a specified margin.

The mortgage interest used for this assessment may also be based on a stress rate rather than simply the actual mortgage payment.

For portfolio landlords, similar principles may be applied when assessing the wider portfolio.

The exact calculation varies between lenders.

What Happens If One Property Is Underperforming?

This is where portfolio underwriting can become particularly important.

A landlord may own several properties that generate strong rental income alongside another property where the rent provides relatively weak mortgage coverage.

Depending on the lender's methodology, that weaker property could affect the overall portfolio assessment.

It does not necessarily mean that another mortgage is impossible.

The outcome can depend on:

• the lender;

• overall portfolio position;

• level of equity;

• rental income;

• mortgage balances;

• personal income; and

• the new transaction.

Understanding potential issues before submitting an application can help avoid unnecessary applications to lenders whose criteria are unlikely to fit.

Does Personal Income Matter for Portfolio Landlords?

It can.

Although rental income is central to Buy to Let lending, some lenders may also consider the landlord's personal income and wider financial circumstances.

This may include:

• employment income;

• self-employed income;

• company director income;

• pension income;

• other accepted income;

• personal debts; and

• other financial commitments.

The lender may also want to understand whether the applicant has sufficient financial resilience outside the rental portfolio.

Criteria vary considerably between lenders.

Personally Owned and Limited Company Properties

A landlord's portfolio does not necessarily consist entirely of properties held in the same ownership structure.

Some landlords may own properties personally while others are held within one or more limited companies.

This can make portfolio assessment more complex.

A lender may want to understand:

• personally owned properties;

• jointly owned properties;

• Limited Company Buy to Lets;

• companies in which the applicant is a director or shareholder; and

• mortgages associated with those properties.

How these are treated depends on the lender's criteria.

Can I Have More Than One Property Company?

Potentially.

Some landlords use more than one limited company for property investment.

From a mortgage perspective, the existence of multiple companies can mean the lender needs additional information about the wider ownership structure and borrowing.

Lenders can have different requirements concerning:

• directors;

• shareholders;

• company activities;

• related companies;

• existing borrowing; and

• personal guarantees.

The structure should therefore be considered before approaching a lender.

Tax and accounting advice should be obtained separately from appropriately qualified professionals.

Can Portfolio Landlords Still Use Personal Guarantees?

Where properties are owned through limited companies, lenders may require personal guarantees from directors or other relevant individuals.

The exact requirements depend on the lender and transaction.

A limited company should therefore not automatically be viewed as separating the individuals behind the company from all mortgage liability.

Any personal guarantee should be understood before entering into the mortgage, with independent legal advice obtained where appropriate.

Does Being a Portfolio Landlord Affect Mortgage Rates?

Potentially, but being a portfolio landlord does not automatically mean that every mortgage will have a higher interest rate.

The mortgage product available can depend on many factors, including:

• lender;

• loan-to-value;

• property type;

• mortgage amount;

• ownership structure;

• rental affordability;

• applicant circumstances; and

• product selected.

Some lenders actively operate in the portfolio landlord market, while others have more restrictive criteria.

The headline rate should also not be considered in isolation.

Fees, Early Repayment Charges, mortgage term, flexibility and overall cost can all be important.

How Much Deposit Does a Portfolio Landlord Need?

There is no single deposit requirement that applies to every portfolio landlord mortgage.

The required deposit depends on the lender, property, mortgage product and wider circumstances.

A larger deposit reduces the loan-to-value of the new mortgage.

This can sometimes improve product availability and can also reduce the rental income required to support the mortgage.

However, the lender may still assess the wider portfolio regardless of how large the deposit is on the new property.

Can Equity in Existing Properties Help Fund Another Purchase?

Potentially.

A landlord may consider raising capital from an existing property to help fund another purchase.

This could involve remortgaging an existing property and releasing some of the available equity.

For example, if a property has increased in value and the existing mortgage is relatively small, there may be equity available.

However, available equity does not automatically mean the full amount can be borrowed.

The lender will still consider:

• property value;

• rental affordability;

• maximum LTV;

• existing mortgage balance;

• purpose of the additional borrowing; and

• wider applicant circumstances.

Early Repayment Charges on an existing mortgage should also be considered before refinancing.

Using One Property to Help Buy Another

Building a portfolio sometimes involves using equity accumulated in one property to contribute towards the deposit on another.

This can potentially help a landlord expand without funding every future deposit entirely from cash savings.

However, increasing borrowing on an existing property also increases debt across the portfolio.

It can therefore affect:

• monthly mortgage costs;

• rental coverage;

• portfolio LTV;

• future affordability;

• cash flow; and

• financial resilience.

Portfolio growth should therefore be considered alongside the effect of additional borrowing.

Should I Use Interest-Only Mortgages?

Many Buy to Let landlords use interest-only borrowing, but this does not mean it is automatically appropriate for every portfolio.

With an interest-only mortgage, monthly contractual payments generally cover interest rather than reducing the original mortgage capital.

This can help with monthly cash flow, but the capital remains outstanding.

A landlord with several interest-only mortgages may therefore accumulate substantial mortgage debt across a portfolio.

It is important to have a clear understanding of how that borrowing is expected to be repaid over the longer term.

Portfolio Cash Flow Matters

Property value is only one part of a portfolio.

A landlord can own a portfolio with substantial overall value but still experience cash-flow pressure.

Expenses can include:

• mortgage payments;

• repairs;

• maintenance;

• letting fees;

• management fees;

• insurance;

• service charges;

• licensing;

• compliance costs;

• accounting;

• taxation; and

• periods without rental income.

If several properties require unexpected expenditure at the same time, the effect can be significant.

Maintaining appropriate financial reserves can therefore become increasingly important as a portfolio grows.

What Are Rental Voids?

A rental void is a period when a property does not have a tenant generating rental income.

With one property, a void means that one property's rent has temporarily stopped.

With a larger portfolio, there is a greater possibility that one or more properties could experience vacancies, repairs or tenancy changes at any particular time.

Mortgage payments and many other costs continue regardless.

Portfolio planning should therefore allow for the possibility that rental income will not always arrive exactly as expected.

Does the Type of Property Matter?

Yes.

A portfolio might contain different types of rental property, including:

• standard residential Buy to Lets;

• flats;

• houses;

• HMOs;

• multi-unit properties;

• student accommodation;

• holiday lets; and

• other specialist properties.

Different property types can require different lenders and underwriting approaches.

For example, a lender comfortable with a portfolio of standard single-let houses may have different criteria for a portfolio containing several HMOs.

The composition of the portfolio can therefore be relevant as well as its size.

Portfolio Landlords and HMOs

HMOs can introduce additional considerations because they may involve more specialist lending, licensing requirements and different valuation approaches.

A landlord's experience can also become particularly relevant.

Some lenders may be comfortable with experienced landlords purchasing HMOs but take a more cautious approach where the applicant has limited experience.

If an existing portfolio includes HMOs, lenders may also want more detailed information about those properties.

Portfolio Landlords and Holiday Lets

Holiday lets can also be assessed differently from conventional Buy to Let properties.

Income may fluctuate depending on occupancy and seasonality rather than being based on a conventional monthly tenancy.

A portfolio containing holiday lets may therefore require lenders comfortable with this type of property and income structure.

You should not assume that a standard Buy to Let lender will treat every rental property in exactly the same way.

Can I Remortgage Properties Within a Portfolio?

Yes, subject to lender criteria.

Portfolio landlords frequently review individual mortgages as existing deals approach their end dates.

A remortgage may be considered to:

• obtain a new mortgage product;

• change lender;

• raise capital;

• restructure borrowing;

• reduce the mortgage balance;

• change the mortgage term; or

• support another property purchase.

However, the lender may assess both the individual property and the wider portfolio.

A mortgage that was available several years ago is not guaranteed to be available on the same basis when it is time to remortgage.

Should I Remortgage the Whole Portfolio at Once?

Not necessarily.

Properties within a portfolio can have mortgages ending at different times and may have different Early Repayment Charges.

Moving every property at the same time could therefore be unnecessary or expensive.

In many cases, each mortgage can be reviewed according to its own circumstances while keeping the wider portfolio strategy in mind.

This is where maintaining accurate records of mortgage deal end dates and Early Repayment Charges can be particularly useful.

Keep a Record of Mortgage End Dates

As a portfolio grows, mortgage administration becomes increasingly important.

For every property, consider keeping an up-to-date record of:

• lender;

• mortgage balance;

• interest rate;

• repayment method;

• monthly payment;

• mortgage term;

• current product end date;

• Early Repayment Charges;

• property value;

• monthly rent; and

• tenancy information.

This can help identify upcoming refinancing requirements before they become urgent.

Don't Wait Until the Last Minute to Review a Mortgage

Portfolio landlords can benefit from reviewing mortgages well before an existing deal ends.

More complex applications can require additional documentation and underwriting.

Starting early gives more time to:

• review the existing mortgage;

• assess the portfolio;

• update property values and rents;

• identify documentation requirements;

• research lender criteria;

• consider Early Repayment Charges; and

• address potential affordability issues.

It also reduces the risk of making decisions under unnecessary time pressure.

Growing a Portfolio Too Quickly

Access to mortgage finance does not necessarily mean that expanding a portfolio as quickly as possible is appropriate.

Every additional property can introduce more:

• borrowing;

• maintenance;

• management;

• tenant exposure;

• regulatory responsibility;

• financial commitment; and

• concentration in property as an investment.

Property values can fall, mortgage costs can rise and rental income is not guaranteed.

Portfolio growth should therefore be considered alongside cash flow, financial reserves and longer-term objectives.

What Documents Might a Portfolio Landlord Need?

Requirements vary between lenders, but you may be asked for:

• proof of identity;

• proof of address;

• bank statements;

• evidence of personal income;

• evidence of deposit;

• existing mortgage statements;

• rental information;

• tenancy information;

• a property portfolio schedule;

• company information where applicable;

• accounts where applicable; and

• details of the property being purchased or remortgaged.

Additional documents may be required depending on the lender, property and transaction.

Keeping this information organised can make future applications considerably easier.

The Portfolio Landlord Mortgage Process

Although every application is different, the process may involve the following stages.

1. Review the Existing Portfolio

Establish the properties owned, values, mortgages, rents, ownership structures and current mortgage arrangements.

2. Understand the New Transaction

Determine whether you are purchasing another property, remortgaging, raising capital or restructuring existing borrowing.

3. Assess Rental Affordability

Consider both the proposed property and any wider portfolio affordability requirements.

4. Review Loan-to-Values

Assess the LTV of the new transaction and, where relevant, the wider portfolio.

5. Research Appropriate Lenders

Identify lenders whose portfolio criteria fit the applicant, properties and ownership structure.

6. Prepare Documentation

Gather the portfolio schedule and supporting personal, mortgage, rental and company information.

7. Submit the Mortgage Application

The lender assesses the new mortgage alongside the information required about the wider portfolio.

8. Property Valuation

The property being financed is assessed according to the lender's valuation requirements.

9. Underwriting

The lender considers the property, applicants, rental affordability, existing portfolio and supporting documentation.

10. Mortgage Offer and Completion

If the lender is satisfied, a mortgage offer may be issued before the legal work proceeds towards completion.

Portfolio Landlord Checklist

If you already own several rental properties, it can help to maintain an up-to-date record of:

• every property you own;

• estimated property values;

• mortgage balances;

• monthly mortgage payments;

• mortgage lenders;

• mortgage product end dates;

• Early Repayment Charges;

• monthly rents;

• tenancy details;

• ownership structures;

• company details where applicable;

• available equity;

• personal income;

• financial commitments; and

• available cash reserves.

Having this information ready can make it much easier to understand the position of the portfolio before applying for further finance.

Speak to Cambs Ely Mortgages About Portfolio Landlord Mortgages

Whether you're purchasing another rental property, reviewing existing mortgages, raising capital or considering how to finance the next stage of your property portfolio, we can discuss your circumstances and help you understand the mortgage options available.

Cambs Ely Mortgages provides Buy to Let and property finance advice to landlords and property investors in Ely, Cambridge, Cambridgeshire and across England, with remote appointments available.

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Important Information

The information contained in this guide is intended for general educational purposes and does not constitute personalised mortgage, investment, financial, legal, accounting or tax advice.

Portfolio landlord definitions, rental affordability calculations, Interest Coverage Ratios, stress rates, loan-to-value requirements and lender criteria vary between lenders and may change.

Property investment involves risk. Rental income and property values are not guaranteed, and you remain responsible for mortgage payments during periods when a property is not generating rental income.

Tax treatment depends on individual circumstances and may change. Appropriate professional tax, accounting and legal advice should be obtained where required.

Your property may be repossessed if you do not keep up repayments on your mortgage.

The Financial Conduct Authority does not regulate some forms of Buy to Let mortgage.