Buy – To – Let Portfolio ( BTL Portfolio Mortgages)
Buy To Let Mortgages – Portfolio mortgages ( BTL Portfolio Mortgages ) are NOT regulated by the Financial Services Authority.
BTL Portfolio lending products available for;
- From 3 or 4 houses / properties
- to £1M+ deals across multiple properties or entire apartment blocks
Basics of Growing a Buy To Let Portfolio
When landlords have two or more properties, this is generally referred to as a property portfolio. Mortgage lenders have designed a product known as a buy to let portfolio mortgage loan which allow landlords to better manage their property portfolios. This type of mortgage is relatively niche, but can make a real difference to landlords who own, or are likely to own, more than one buy to let property
Once an investor has successfully purchased and managed one buy to let property, the natural progression is to consider an additional property or properties to create a portfolio. Whilst it is true that the lessons learnt from the first property will make the process of growing a portfolio easier and quicker, knowing how, when and why to grow a portfolio, nevertheless, requires a totally new set of skills.
The Buy to Let mortgage portfolio is treated as a single account – Although the mortgage portfolio can incorporate a variety of interest rates, it is treated as a single mortgage account regardless of the number of buy to let portfolio properties. This means one direct debit mandate, one monthly payment and one mortgage statement for the entire buy to let mortgage / property portfolio.
Buy to Let Portfolio lending
For example, if the total portfolio was worth £2 million and the loan outstanding is £1.3 million, a credit facility of up to £300,000 could be available to take the total loan to 80% of value.
This is useful for an investor who wants to make bids on properties without having to make an application for additional finance each time. The newly purchased property is then added to the portfoilio which increases the credit facility once again.
Lenders will usually look at portfolios of between £500,000 and £10 million and will expect rental income to be in the region of 130% of the loan repayments. The interest rate charged will often be more competitive than rates on smaller individual loans.
You may be able to borrow more than the property’s value
Because rental income and loan to value is averaged across the mortgage portfolio, you can take advantage of any excess rental income or equity to support the purchase of other properties for their portfolio. Take a look at the next 2 images that will try to explain how BTL portfolio lending can work;
You can use Buy to let Portfolio lending to use equity of other properties in the portfolio to effectively purchase a new portfolio property with no deposit in effect a 100% BTL mortgage!!
Why Grow a Buy to Let Portfolio
The more properties that an investor owns, the easier it is to spread risk and to manage unforeseen circumstances. If you have an average void of 7 percent a year then, on average, you will have 25.5 days when the property is empty and no rent is being obtained. Consider a portfolio of 10 properties, each bringing in £600 a month. If the mortgage payments on all 10 properties are £450 each a month, it is possible that one property can be empty without the portfolio making any loss.
For example, monthly income is £6,000 and the monthly outgoings are £4,500. If one property is empty in any given month, the income from the portfolio becomes £5,400 and the monthly outgoings remain at £4,500. Although the profit is reduced, it is easy to see how a larger portfolio allows an investor to smooth the effect of unexpected costs and void periods.
You can also use the portfolio to offset poor rentals, ie it may be a property that you desperatly want to buy – but the mortgage valuers rental figure is too low to justify the mortgage – you can spread the risk across the rest of your BTL portfolio to boost the amount that can be borrowed.
Buy To Let Mortgages – Portfolio mortgages ( BTL Portfolio Mortgages ) are NOT regulated by the Financial Services Authority as they are regarded as a commercial investment transaction.
Buy To Let Mortgage Caution !
The mortgage valuation will include an estimate of the rental income of your chosen property on an unfurnished basis.
Buy to Let can be a huge investment and like all types of investment it carries some risks. Our Mortgage Advisers can help you understand the financial commitments involved, but can’t offer you advice on whether this type of investment is right for you based on your individual financial circumstances.
Please remember there are no guarantees as to what rental income your Buy to Let property will generate and whether it will rise in value over the years.
We can only advise on the mortgages it offers. We cannot offer advice on whether Buy to Let is the right form of investment for you. Please remember you will still have to pay any Buy To Let Mortgage payment whether the property is rented out or not.
What are the advantages of buy to let portfolio mortgages?
Buy to let portfolio mortgages are of advantage to some landlords because they allow landlords to borrow above the value of an individual property – very useful for home improvements and decorating. They also mean that rental income and loan to value levels are averaged out across the whole portfolio of mortgage loans, allowing landlords to take advantage if rental income exceeds expectations.
How do buy to let portfolio mortgages work?
When a borrower takes out a buy to let portfolio mortgage, it can incorporate several different interest rates, or many if the portfolio is large enough. The loans are treated as a single account however many buy to let properties are included. There is, therefore, only one direct debit, one monthly payment, and one mortgage statement for the entire portfolio.
When to Grow a Buy to Let Portfolio
This really is a personal choice and depends on the finances available and the time factor involved in sourcing a new property. Contact your lender and ask whether they will be prepared to advance you further cash, as this is likely to be the deciding factor. Generally, it is worth waiting at least one year. This is because you will then have dealt with most aspects of managing your original property, you will have gained a reputation with your lender of being a solid investor and it is possible that your original property will have gained sufficient capital value to allow for re-mortgaging which can be used to fund all or part of the next deposit.
How to Grow a Buy to Let Portfolio
One of the best ways of hedging your bets as a landlord is to spread your risk across several different markets. For example, if you currently have a professional flat for rent, why not add a student let, because these two properties will not suffer from the same fluctuations and are, therefore, much more likely to assist in the smoothing of any unpredicted costs.
Most BTL mortgages are arranged on an interest only basis, this is because the landlord can deduct the interest only portion of the buy to let mortgage as a deductable expense before declaring for income tax purposes.
- Buy To Let portfolio Mortgages
- Buy To Let portfolio lending
- BTL Portfolio lending
Enquire now about Buy To Let Portfolio Mortgages