The client was an experienced landlord with a property portfolio consisting of 36 BTL properties. He had recently acquired a property for cash at auction and had completed the refurbishment of the property in readiness for letting. He was seeking to extract cash out of this property by raising a BTL facility so that he could then pursue further opportunities in the market.
A solution was identified with a relatively new entrant within the BTL sector that has a real specialisation in dealing with portfolio landlords, with over 60% of their lending in this niche. We approached the lender to see if a deal was feasible.
Lenders class all applicants with 4 or more mortgaged properties as portfolio landlords and they are subjected to a far more rigorous underwriting procedure. This includes checks on all the properties within the portfolio to ensure that the rental income being generated is sufficient, both individually and collectively.
“The client was able to quickly secure the funds he needed at a competitive rate.”
The nature of this background check varies from lender to lender and makes the whole application and underwriting process far more involved and time-consuming, with some lenders taking up to a month to even assess a case.
A further complication with this case was that all of the applicants’ income was being generated via his portfolio and he had no other sources of income. Most lenders look for an additional income source that is not derived from the letting of property.
However, the lender was able to offer competitive terms on the subject property with a very straightforward rental stress test of 125% at 5%. Furthermore, this was achieved without having to subject the client’s entire portfolio to any demanding rental checks. The lender was also happy to work purely from his letting income, without any requirement for supplementary income.
This type of situation has become much more difficult to place due to the PRA rules that now apply to portfolio landlords. However, the end result was that the client was able to quickly secure the funds he needed at a competitive rate of interest that allowed him to continue the expansion of his property business.
