Posted on 13 June 2017 by
In September 2017, the Prudential Regulatory Authority (PRA) has confirmed it will bring in tougher underwriting standards for buy-to-let lenders dealing with applications from landlords with four or more mortgaged properties.
While it is unclear exactly how the tougher regulation will impact the market, we do know it will mean that lenders will have to demonstrate that they have carried out a more detailed review of a landlord’s business model, and their ability to manage risk.
This means that lenders will potentially want to stress test a landlord’s entire portfolio. Lenders may also request landlords provide rental income accounts and possibly a full business plan to support any new mortgage application.
What does this mean if you’re a landlord?
The increased scrutiny will undoubtedly lead to a longer timeframe between application and offer, as underwriters will have to spend more time assessing you, the borrower. It could also mean that the amount of money you’re able to borrow will decrease if you’re not able to meet the stress test across your entire property portfolio.
For landlords with four or more properties, this could mean that you won’t be able to utilise the equity in your existing portfolio to fund further property purchases.
It may also lead to some lenders choosing to exit the sector entirely, for the short term at least. The knock on effect for the lenders that do continue to operate in the market could be an overall increase in applications - which in turn could lead to a bottle neck and further delays.
What can you do?
What is clear is that the process of obtaining a mortgage for portfolio landlords is likely to take longer if you wait until after September 2017. And you may not be able to borrow as much as you need to continue growing your property portfolio.
So if you are looking to buy more property and need to use equity tied up in your portfolio or simply need to raise a mortgage against the new property, then it may pay to speak with an expert before the changes come in to force, even if you haven’t identified a your property purchase just quite yet.
For more information on the changes or to arrange a review of your BTL portfolio call us now on 0344 346 3672 or submit an enquiry to our experts here.
Categories: Buy to let
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