Mortgages for professional landlords can often be complicated. I recently assisted a client with a multi-million pound portfolio, which highlights some of the problems often faced.
My client had built up a large portfolio over his lifetime, and now owned twelve buy-to-let (BTL) properties. He derived all of his income from this portfolio, which meant he was a professional landlord. This created some problems for him whilst looking to remortgage one of his properties. Professional landlords can be looked at cautiously by many lenders, as unlike a secure salary, rental income is not always consistent.
He was looking to remortgage two of these BTL properties, which were both Houses in Multiple Occupation (HMO) with a combined valued of just under £2million. This money would be used for property renovations.
Some lenders are cautious about lending against HMOs, which was an initial problem. In this instance, my client was also not reporting particularly high net profits. Increasingly stringent regulation means most lenders now look much more closely at income versus expenditure, to make sure the client can afford the mortgage should there be a rental void period.
The potential lack of consistent income means that increasingly, lenders also stress test the portfolio in the background at quite a high interest rate. In the last year, stress testing has become more aggressive than ever, with BTL rental income sometimes being stress tested at 5.5% with 145% rental coverage.
Whilst this has deterred some landlords from buying more BTL property, this is a much bigger problem for professional landlords who need to remortgage, like my client. Fortunately, I have an excellent relationship with a flexible lender who are happy to work with such clients.
Through this lender, I secured my client a 5-year fixed rate of 3.69% over a 25-year term. This gave the client more security, meaning they wouldn’t have to struggle to remortgage again in two years’ time. If you’re currently researching mortgages for professional landlords, you may save yourself considerable time and money by consulting a broker—if you’d like to have a discussion about your options, I would be happy to assist.