BTL: keeping up with new regulation
By Julie Griggs, director
The buy-to-let (BTL) landscape has seen many changes in recent times and brokers, together with their clients, have had a lot to digest, particularly where property portfolios are concerned.
According to the PRA, “a landlord will be considered to be a portfolio landlord where they have four or more mortgaged buy-to-let properties across all lenders in aggregate.”
In a complex environment, landlords need guidance from their brokers – some might not be aware that they are in fact portfolio landlords.
Tougher underwriting criteria
Lenders are now viewing portfolio landlords as running a professional property business and have enhanced their underwriting requirements, which include:
– Property schedule
– Personal income and expenditure form
– Business plan
– Proof of personal income – SA302/tax overview
As we often find in our industry, even though the guidance provided on the new regulations is clear, most lenders have requested variations of the way they will accept the information. This leaves brokers and indeed clients with an uphill struggle as to how to record their information.
How brokers can help their portfolio landlord clients
Recently we held a day specifically for portfolio landlords and explained to them what the recent changes to the underwriting rules made by the PRA would mean to them. We have developed some tools which, we believe, cover all of the information required by any one of the lenders we deal with and have provided these to our portfolio landlords already. They are gradually collating the information, which will be updated on a regular basis, so when they are ready to purchase or re-mortgage one of their properties, the information required by the lender will be to hand.
In particular, the property schedule includes a great deal of information, which enables us as a broker to calculate the aggregate LTV, aggregate affordability and long-term cashflow in respect of the portfolio. All of this (in one way or another) is required by each lender, before submitting the application. Additional information requested on our schedule is confirmation of whether the property is owned by an individual or limited company and whether it is a residential BTL, HMO, semi-commercial or commercial property. Although not every lender requires the breakdown of the semi-commercial and commercial properties, some do. Keeping this up to date not only means frequent communication with our client, but it also enables us to identify warning signs of any properties which may be affecting the overall performance of the portfolio.
For the professional landlord, the process of obtaining finance will be more complex, but by keeping their records and paperwork up to date and using the services of a broker who has the experience, knowledge and tools to assist them, there will be opportunities ahead.
We look forward to assisting our professional landlords through the current changes in the BTL market and in the future, whatever this may hold.