Portfolio Mortgages explained

15/06/2022

If you’re a landlord with multiple properties, a portfolio mortgage could make managing your finances far simpler.

Having a large portfolio of buy-to-lets can be a real headache, in more ways than one! Luckily, a portfolio mortgage enables landlords to place all of their buy-to-let mortgages under the umbrella of one mortgage, which is treated as a single account. This portfolio is then registered as a limited company. As such, all finances and expenditures are put through the business, meaning you can take advantage of any tax efficacies that are available. This means you can do away with having separate lenders for each of your properties and streamline your portfolio with one lender. Sounds pretty good, right?

Portfolio mortgages make managing your finances simpler if you own multiple properties

Who can secure a portfolio mortgage?

Portfolio mortgages are for landlords who own multiple buy-to-lets. Lenders will tend to approve portfolio mortgages for landlords who own around four properties minimum. Lenders may also look for a minimum value on your portfolio, instead, usually around £500,000.

What are the rates like for portfolio mortgages?

The rates for your portfolio mortgage will be calculated on the existing rates across your portfolio, incorporating each of your mortgage rates into one single rate. This rate will be the average of the rates across your portfolio.

It’s important to bear in mind that buying new properties as a limited company will most often incur higher rates in comparison to purchasing a buy-to-let using more traditional methods, outside the remit of a limited company.

This is because your lender takes on a greater amount of risk when lending to a limited company, if a limited company goes bust, lenders may encounter difficulties when trying to retrieve debts. However, as more landlords are acting under limited companies when purchasing properties, lender fees are becoming increasingly competitive.

If a lender considers you to be an eligible portfolio landlord when you are applying for a buy-to-let mortgage, they will then proceed with underwriting checks, portfolio mortgage stress testing and affordability checks.

If you are considering a portfolio mortgage, it’s a good idea to seek advice from a trusted, independent financial adviser. A portfolio mortgage is technically a ‘niche’ mortgage and requires specialist advice, so it’s wise to seek expert guidance before you act.

Portfolio mortgages allow landlords to streamline their lending

What are the benefits of a portfolio mortgage?

In short, portfolio mortgages enable landlords to streamline their lending. This is the key reason why you may consider this type of mortgage.

If a landlord owned a large multitude of buy-to-lets, each with a separate mortgage, this would mean that you would have a large number of monthly outgoings being paid to multiple lenders.

With a portfolio mortgage, a landlord is able to solely focus on one single repayment each month, to one lender. This enables your portfolio to become far more streamlined and simplified. With one mortgage statement, one payment, one lender and one point of contact, the mortgage may feel clearer and more manageable.

This can be particularly useful for landlords who have large mortgages on expensive properties within their portfolio, located in say, London perhaps. If you are based in London with multiple buy-to-lets, you may find that a portfolio mortgage enables you to manage your hefty repayments with greater clarity. Additionally, you may find that securing a portfolio mortgage for your properties can help to level up your borrowing power, even if you have under-performing properties in your portfolio.

Under-performing properties, those that are not generating as much profit as others within the portfolio, often stand out as something of a red light for lenders, who may view them as liabilities. However, if your portfolio is under one single umbrella mortgage, your well-performing properties will help to compensate for those that aren’t doing as well.

Why is this, you ask? Well, lenders will typically assess income and expenditure together as one whole, as opposed to on a case-by-case basis. Resultantly, landlords with a portfolio mortgage are able to spread income over their entire portfolio. This may help to increase the maximum by which you can borrow.

If you’re looking for advice with your buy-to-let portfolio, we can help. Simply get in touch with B-Advised today for quality guidance that you can trust.