Hi, Peter Jones, chartered surveyor, author, and property investor.
And I’ve been asked ‘what does it mean when you hear the banks talking about a portfolio landlord, and why does it matter?’
Well, this relates specifically to buy to let because relatively recently, within the last couple of years, the banks have been told by The Council of Mortgage Lenders and The Bank of England to look at the whole picture of a property investor before they decide whether they’re going to make a loan, particularly a buy to let loan.
And so, they introduced a new category of investor, which is the Portfolio Landlord.
To be a Portfolio Landlord you have to have 4 properties, and it doesn’t matter whether they’re 4 properties in your own name, or whether they’re 4 properties in a limited company, or whether they’re 2 properties in your name or 2 properties in a limited company, if you have 4 properties, regardless of how you structured your business and regardless of how you structured the ownership, you are a portfolio landlord.
And what it means is this, before you get to the point were you’re a portfolio landlord, then the buy to let lender is going to look at their usual lending criteria and they’re going to look at the property and then they’re going to make an assessment as to whether they want to actually lend on that property and lend you the money.
If you’re a portfolio landlord though, and you have more than 4 properties they’re going to look at the entire portfolio.
A practical consequence of this is that there’s going to be more paperwork involved, they’re going to want spreadsheets showing the properties in your ownership, showing what current mortgages being paid are, showing what the rent being received is, and what the equity across the portfolio is.
But, one thing which they’ll crucially be looking at is the loan to value ratio across the whole portfolio.
Now, it doesn’t necessarily follow that you’ve got to have a 75% loan to value or else they’re not going to lend to you, some banks will accept a slightly higher loan to value figure, some may want less, and this is one of the reasons why you need to have a good broker, because a good broker will be able to match you to the right lender in order to get the right amount of finance, and to be able to take into all of your circumstances, including how the overall portfolio looks.
So, it’s nothing to be alarmed about.
I suppose a quick summary is that once you go past 4, the banks are just checking to make sure, they’re sort of stress testing your whole portfolio before they lend to you, but if you’re buying sensible properties and you’re doing your normal due diligence it shouldn’t make any difference at all, other than the fact there may be a little bit more paperwork, and your mortgage broker may be asking you for just a little bit more information around the portfolio as a whole and not just the property you’re lending on.
But, it’s just one of these things which we have to deal with in business.
To be honest it’s not really a big deal, although I think sometimes people get a little bit worried about it. Nothing to worry about, it’s just one of those things that’s out there but it doesn’t really make that much difference to be honest.