Portfolio Mortgages 101: Your Comprehensive Guide to Building a Property Empire

Jan 25, 2024 | 0 comments

A landlord with at least four mortgaged buy-to-let properties in the UK is classed as a portfolio landlord. This is a definition that applies to both sole and joint owners, and includes properties that have been purchased within a limited company.


If you are looking to become a portfolio landlord and expand your property empire, here are a few things you need to know to ensure your application proceeds smoothly and efficiently.


Is unencumbered property included in a property portfolio?


Generally unencumbered property does not count towards a property portfolio. This means that if you own seven buy-to-let properties but only have mortgages on two of those properties, you will likely not be considered a portfolio landlord. However, it is important to discuss this with your lender to determine their policy in this regard.


Do portfolio landlords need to meet additional mortgage application criteria?


When the time comes to add to your existing collection of portfolio mortgages, many lenders will talk you through any additional portfolio landlord criteria you will need to meet in order for your application to be accepted.


Lenders will always ask to see information regarding your existing portfolio mortgages and the properties you own. You will likely also be subject to additional underwriting checks, which can mean that the process of securing additional buy-to-let mortgages will take slightly longer.


In 2016, the Prudential Regulation Authority (PRA) provided lenders with specific guidance regarding portfolio landlords. This guidance included the requirement for portfolio landlords to provide lenders with a selection of documentation including a business plan and documents which forecast cash flow. Lenders will also stress test an existing portfolio to ensure that their affordability criteria will be met in the event that interest rates rise in the future.


Are there any restrictions that portfolio landlords might experience?


Some lenders do place restrictions relating to the size of a landlord’s property portfolio. Most lenders will continue to consider portfolio landlords with fewer than 10 mortgaged buy-to-let properties. Landlords with large property portfolios will typically only be able to obtain the best rates and deals from a specialist lender, as restrictions are put in place by high street lenders.


Additionally, lenders may also restrict the maximum amount of debt an individual can take on and may restrict the loan to value (LTV) rates on offer.


Should portfolio landlords use a mortgage broker?


Mortgage brokers and financial advisers who specialise in portfolio mortgages can help landlords to save time and money when expanding their property empires. In addition to understanding the specific criteria that each lender has in place when reviewing portfolio mortgage applications, brokers and advisors can help landlords to ensure that all required documentation is ready to be submitted on time to make the process as efficient and seamless as possible.