What Is a Portfolio Mortgage?
A portfolio mortgage - or buy-to-let portfolio mortgage - is a type of mortgage that’s specifically for portfolio landlords. You’re a portfolio landlord if you have 4 or more mortgaged rental properties, including those owned in your private name or through a limited company.
Landlords with 3 or less mortgaged rental properties are often classified as private landlords and only require normal buy-to-let mortgages or limited company buy-to-let mortgages. Portfolio mortgages sit in-between buy-to-let mortgages and commercial mortgages. They’re almost always interest-only like normal buy-to-let mortgages because they’re still for buy-to-let properties. A portfolio mortgage lender will typically ask you for all the same stuff as a normal buy-to-let lender, except they’ll also ask you to provide a business plan and property schedule.
We’re a specialist mortgage broker with experience arranging portfolio landlord mortgages. See below to compare portfolio mortgage rates and find out how we’ll help you.
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How Does a Portfolio Mortgage Work?
A portfolio mortgage works in the same way a normal buy-to-let mortgage.
- Secured on rental properties
- Typically interest-only
- On a one mortgage per property basis – not one mortgage across the whole portfolio
You will need portfolio mortgages when you reach 4 or more properties. This portfolio mortgage would go on your 4th property, then every rental property after your 4th would require a new portfolio mortgage. You wouldn’t need to remortgage any existing properties currently on buy-to-let mortgages onto portfolio products, unless your introductory period was due to end and you didn’t want to go onto your lender’s SVR (Standard Variable Rate).
You can have 4 – 100s of properties with portfolio mortgages.
Portfolio mortgages can be used to finance the following:
- Normal buy-to-let properties
- Limited company buy-to-lets – this would require a limited company portfolio mortgage
- Auction properties
- Student buy-to-lets
- Multiple flats under one freehold
- HMO (Houses of Multiple Occupation)
Portfolio Mortgage Process
1. Meeting with Adviser and Mortgage Research
When you phone us, you can either arrange a phone appointment with your adviser or a face-to-face meeting – whatever suits you. Your adviser will ask you some questions and, once they have all the information they need, they’ll go away and find you the buy-to-let mortgage for your circumstances and future needs. They’ll also arrange a follow up call to present you with what they’ve found. It may require more than one conversation to gather all the right information, depending on where you are in your property search.
2. Decision in Principle
Once you’re happy with their recommendation, your adviser will go about securing your DIP (Decision in Principle) - which is basically a promise from the lender that they’ll loan you money on the condition that the information you’ve provided is correct and subject to a valuation of the property.
3. Offer on Property/Refinancing
After you’ve secured a DIP (Decision in Principle), you’ll be in a great position to make an offer on a property or move forward with refinancing.
4. Pre-Application and Submission
Following the acceptance of your offer, we’ll send you some information which explains all the documents we need to submit to the lender. You’ll be assigned a client relationship manager who’ll check and submit certified copies of your documents; they’ll liaise with both you and the lender. Your adviser will then submit the fully packaged mortgage application.
5. Lender Underwriting and Valuation
The lender will underwrite your application; this basically means they’ll verify the information you’ve provided and review all your documents for themselves. They’ll also instruct a valuation for their purposes on the property.
6. Mortgage Offer
If the lender is happy with everything they’ve found, they’ll send you a mortgage offer. They’ll also send us a copy.
After you’ve accepted your mortgage offer, you’ll go through the legal part of the process, known as conveyancing. This is where the solicitors/conveyancers draw up contracts and organise the actual, legal purchase of the property/refinancing. If buying, you’ll also need to arrange buildings insurance at this stage, making sure it’s in place from exchange.
8. Exchange and Completion
Once everything is in place, your conveyancer/solicitor will exchange contracts with the seller’s conveyancer/solicitor. It’s at this point that you put down your deposit and are legally bound to buy the property. You’ll lose your deposit if you pull out after exchange. The purchase completes when money is transferred on an agreed-upon date. This is when you get the keys to your new home.
Portfolio Mortgage FAQs
What Is the Best Mortgage for a Landlord?
- If you have up to 3 rental properties then you’ll require multiple normal buy-to-let mortgages - you may also want to consider purchasing any buy-to-lets through a limited company as this has certain tax efficiencies privately-owned buy-to-lets don’t
- If you own 4 or more rental properties then you’ll need portfolio mortgages for any further properties and/or when you remortgage existing buy-to-let properties
- If your overall borrowing exceeds the limits set by your buy-to-let/portfolio lenders then you may need commercial lending
What Is the Definition of a Professional Landlord and Is It Different from a Portfolio Landlord?
You’re a professional landlord if your main source of income is rent from rental properties. People with buy-to-let properties who already have a job/earn most of their income another way are referred to within the industry as “amateur landlords”.
A lot of professional landlords are also classified as portfolio landlords, as they have 4 or more rental properties which are also their main source of income.
Are Mortgages for Professional Landlords the Same as Portfolio Mortgages?
The status of being a professional landlord in itself won’t determine which mortgage you need. You’re a professional landlord if your main source of income is rent from rental properties. Therefore, you can be a professional landlord with up to 3 properties – which would make you a normal buy-to-let borrower - or more than 3 – which would make you a portfolio landlord who requires portfolio mortgages.
Are Portfolio Loans a Good Idea?
Portfolio loans/mortgages are specifically designed for portfolio landlords – i.e. people with 4 or more rental properties. Therefore, if you have/want 4 or more rental properties, portfolio landlord mortgages will be the only suitable product unless your overall borrowing exceeds the limit set by portfolio mortgage lenders.
How Many Mortgages Can You Have at Once?
You can have 4 – 100s of portfolio mortgages at once. Lenders will have their own limits on the maximum number of rental property mortgages you can have with them, limits on the maximum number of mortgaged rental properties across all lenders and overall limits on the maximum amount you can borrow across all lenders. You may need a commercial mortgage when you reach these borrowing limits. This includes properties owned in your private name and properties owned through a limited a company.
If you reach this borrowing limit and require commercial lending, then you may want to consider remortgaging most – if not all – of your portfolio onto commercial mortgages.
Will I Need Multiple Property Mortgages at Once or Can I Have One Portfolio Mortgage Across My Properties?
You would normally have a different portfolio mortgage on each property, not one mortgage across all your properties. This is called crosscharging and is very rare for residential purchases.
You can have 4 – 100s of portfolio mortgages at any one time. If you already have buy-to-let mortgages on existing rental properties, you could remortgage them onto multiple portfolio mortgages or keep them on buy-to-let mortgages.
How Do I Build a Buy-to-Let Portfolio?
Buy-to-let portfolios usually start with the purchase of one property. Then once the landlord has enough money for a deposit on a new property – whether this comes from savings, inheritance, rental profits – they would typically take out a new mortgage on a new buy-to-let property.
When property prices increase landlords will often also look to remortgage or release equity from their existing properties to raise money as deposits for new purchases.
What Information Do Portfolio Mortgage Lenders Ask for?
Portfolio buy-to-let lenders will ask you for a business plan and property schedule in addition to the usual documents buy-to-let lenders will ask for.
Usual documents for buy-to-let mortgages include:
- Personal bank statements
- Business bank statements (for limited companies only)
- Proof of your ID and address
- Evidence of earnings – e.g. payslips (for employed) and tax calculation and tax summary (SA302 - for self-employed/directors)
Additional documents for portfolio mortgages include:
- Full and complete schedule of properties – including: current mortgage details, rent, addresses, etc.
- Business plan