CPS Homes

Further information on new lending rules for 'portfolio landlords'

Further info on new lending rules for portfolio landlords

We recently wrote about new lending rules coming into force later this year. More details have emerged and we now know it’s landlords who own four or more properties with buy-to-let mortgages on them that will see their portfolios scrutinised before being allowed to borrow what they need for their next investment.

The new rules come into force on 1st October 2017 and will apply to landlords who own properties in their own name or that of a limited company.

The Bank of England want to be satisfied that 'portfolio landlords' are good for the money, so will make their decision based on how much equity they have in all of their properties, the current rental income, the location of the properties and the market they sit within, amongst other things.

As a result, landlords need to be prepared to submit a large amount of admin paperwork when making mortgage applications from October onwards, and they should also expect delays as lenders take longer to process the information they receive.

Why are the new rules coming in?

Both the Bank of England and the Government have been concerned about the buy-to-let sector for many years now. The Government worries that landlords are buying up properties that would otherwise be bought by first-time buyers, while the Bank of England believe a large buy-to-let sector may pose risk and problems to the wider economy.

A number of tax changes have been brought in by current and previous Governments in a bid to make buy-to-let less attractive to landlords, and this latest measure is the Bank of England’s way of imposing stricter rules on banks lending for buy-to-let mortgages.

As a 'portfolio landlord', what do I need to do?

You don’t need to do anything unless you’re planning on purchasing a new property or remortgaging an existing one after 1st October 2017.

Every lender will handle the new rules slightly differently, so one may ask for different bits of information to another, but as a general rule you should ensure you have;

  1. The full address of every property in your portfolio and proof of ownership.
  2. How much is outstanding on each mortgage, including the account details and the lender(s).
  3. Bank statements showing the rental income for each property in order to crosscheck the rental income ratio and your mortgage payments.
  4. Tenancy agreements as further proof of rental income. 
  5. Your yearly tax returns (which will show any other source of income) and/or company accounts.
  6. Business plans and cash-flow forecasts.

If you're a landlord looking to add a property to your buy-to-let portfolio, we can help. We can also provide any assistance you may require understanding the new regulations. Get in touch with our team today on 02920 668585, email: enquiries@cpshomes.co.uk, or pop into our Woodville Road branch in Cathays.

07 September 2017

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