What Is a Portfolio Mortgage?
A portfolio mortgage is a type of mortgage that’s specifically for portfolio landlords.
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.
What Is a Portfolio Landlord?
A portfolio landlord is someone with 4 or more mortgaged rental properties, including those owned privately 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.
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How Does a Portfolio Landlord 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'll need a portfolio mortgage when you reach your 4th property and on every rental property after your 4th.
If you already have buy-to-let mortgages on existing properties, you could choose to remortgage them onto multiple portfolio products but wouldn't need to 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 products.
Portfolio products 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 in Multiple Occupation) - HMO mortgages are available as a standalone mortgage product if you don't have a portfolio of 4 or properties
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Buy-to-Let Portfolio 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.
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 products 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 Mortgages for Portfolio Landlords?
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 products.
Are Portfolio Loans a Good Idea?
Portfolio products are specifically designed for portfolio landlords – i.e. people with 4 or more rental properties. Therefore, if you have or want 4 or more rental properties, these mortgage products will be the only suitable option for you unless your overall borrowing exceeds the limit set by portfolio lenders.
How Many Landlord 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 rental properties onto commercial mortgages.
Will I Need Multiple Property Mortgages at Once or Can I Have One 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.
How Do I Go About Building 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 Buy-to-Let Portfolio Mortgage Lenders Ask for?
A buy-to-let portfolio lender will typically ask you to provide all the same stuff as a normal buy-to-let lender, except they’ll also ask for a business plan and property schedule.
Both types of lenders will usually ask for:
- 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)
Buy-to-let portfolio lenders will typically also ask for:
- Full and complete schedule of properties – including: current mortgage details, rent, addresses, etc.
- Business plan
- Assets and liabilities