Lenders are now enforcing new rules on portfolio landlords under the Prudential Regulation Authority’s (PRA) changes to underwriting standards.
The Bank of England’s (BoE) PRA has imposed stricter lending criteria for portfolio landlords – defined as those with four or more buy-to-let properties.
As of 30th September 2017, lenders have put new rules in place when lending to portfolio landlords investing in new properties or remortgaging their existing investments.
We have created a free, handy guide to help you understand how the new rules might affect you: https://landlordnews.co.uk/landlords-guide-pra-portfolio-underwriting-changes/
The changes mark phase two of the PRA’s new underwriting standards for buy-to-let, in an attempt to curb lending to those investing in rental properties. The first phase, which was introduced earlier this year, involved stricter affordability tests for all landlords.
Now, the PRA is requiring changes to the way that lenders underwrite mortgage applications for portfolio landlords, in a bid to improve the level of mortgage arrears rates associated with large property portfolios.
If you are looking to take out a new mortgage or remortgage your existing properties, you will be required to pass specialist affordability checks under the new rules.
Although the PRA has not outlined a specific requirement for lenders, it has advised that they should take the following into account: a landlord’s experience in the buy-to-let sector; their whole property portfolio; their rental income; any outstanding mortgages; and their assets and liabilities. Your historic and future expected cashflow will also be assessed.
When the time comes to apply for a new buy-to-let mortgage or to remortgage a property, you should be prepared to present the following: an up-to-date property portfolio spreadsheet; a business plan; cashflow forecasts; your last three months’ bank statements; submitted tax returns; and potentially your income and expenditure statements for your portfolio.
For this reason, we recommend getting all of your paperwork in order now and speaking to a financial adviser if you believe you’ll be affected by the new rules.