Buy-to-let mortgage options for property portfolio landlords
With an ever changing mortgage market we look at the mortgage options open to property portfolio landlords as well as the constraints imposed by lenders.
With increases to property prices and rents across most of the UK over the last few years, many landlords have been looking to increase their portfolios.
The most obvious way will be to refinance existing property to release capital then used as a deposit against the onward purchase. So, let’s first look at finance options.
As a professional landlord your sole source of income will be from letting property and you will likely hold a high number of properties in your portfolio.
This can unfortunately have a detrimental effect on which lenders will lend to you.
At its worse lenders such as Woolwich & Santander will not lend where income is derived mainly from rental income and the likes of Leeds Building Society and BM Solutions only allow you to have 3 or 4 mortgages with them or as Buy to lets in total.
You can therefore see that many buy to let lenders are not keen for business from a professional landlord.
One of the top three buy to let lenders in the UK is Godiva who are part of Coventry Building Society. But like many top buy to let lenders, Godiva will only lend where there are no more than 10 properties in a portfolio. So for those landlords with portfolios in excess of 10 properties what are your options?
Landlords with more than 10 buy to let properties in their portfolio thankfully have options with some old favourites such as Paragon and as well as some of the relatively new banks and specialist buy to let lenders such as Shawbrook Bank and Precise Mortgages.
Additionally some niche building societies across the UK are willing to lend to professional landlords.
Most of these lenders are open to lending on student let’s, Houses of Multiple Occupancy and commercial let’s.
The terms you can expect from these lenders will generally carry a lenders fee which is a % of the loan amount, but at least there are options and given the high yields from these types of lets the set up costs are relative.
Existing mortgages too good to change
Many of our landlords have mortgages arranged before the credit crunch using lenders that no longer currently lend, such as Capital Home Loans or Mortgage Express.
Or accessed low lifetime trackers before the credit crunch with lenders such as Birmingham Midshires or Woolwich.
These landlords are often reluctant to refinance due to low rates now tracking above Bank Base Rate by perhaps as low as 0.5%. So what options do these landlords have for raising additional capital?
All is not lost in this scenario thanks to second charge loans.
The second charge loan market is very strong and there are a variety of products available that will allow a landlord to release capital without affecting the first charge lender (NOTE: some 1st charge lenders will not allow 2nd charges).
Where possible we will look to put in place a second charge loan or an equity loan up to 85% loan to value thus unlocking capital that you may have thought was not possible to get at without disturbing the low rate finance in place.
What can you expect form the mortgage/Housing market going forward?
Essentially they say that property price inflation is slowing but that ultimately the economy and sentiment is in good shape and they fully expect the next 2 quarters to be good in terms of lending and property purchases and we reflect that sentiment in our thoughts.
We expect 2015 to start really well as the New Year always brings renewed emphasis.
Re-mortgage activity will increase because the inevitable rate rise is getting closer (despite some reports of it not happening until 2016) but also because people like to get finance in order at the start of the year which will likely result in a re-mortgage to a fixed rate for 2/3/5 years.
Santander just announced its lowest ever fixed rate for 2 years and across the board, lenders are producing all time low fixed rates.
New lenders – We have placed business with many new lenders this year and in December we welcome Fleet mortgages who will lend to professional landlords including Ltd company buy to lets and HMO’s etc – all the good quirky stuff we like. More to follow on their launch later this year.
In summary it is all looking rather positive and we are busy refinancing and growing landlord’s portfolios across London, Bristol and the UK.
Fox Davidson portfolio service
We actively manage our client’s portfolios via our tried and trusted portfolio sheet which gives us as well as you an instant visual as to which properties you hold, the rate the end dates of any rates as well as yield and mortgage balance/lender etc. This is updated as your portfolio changes.
We also ensure you are kept up to date with changes to buy to let lenders criteria and are made aware of new buy to let lenders to the market.
To discuss your buy to let portfolio and your options please get in touch.