What are portfolio loans, and how do they work? In this blog, we cover everything buy to let landlords need to know, including whether they’re right for you.
If you’re a landlord with 4 or more properties, managing separate mortgages and repayments can be complicated. That’s where portfolio loans come in to help.
Here, we look at:
- What a portfolio loan is, and how it works
- The benefits and risks of portfolio loans
- Lender criteria
- Whether a portfolio loan is right for you
What is a portfolio loan?
A portfolio loan allows you to consolidate your buy to let properties under one mortgage, with one lender. This type of mortgage is designed for landlords with multiple buy to lets, typically four or more, as lenders class you as a ‘portfolio landlord’.
With this approach, you have a single loan secured against multiple properties, rather than separate mortgages for each. It’s simple, and often more cost-effective.
How do portfolio loans work?
As a portfolio loan covers some or possibly all the buy to let properties within your portfolio, rather than assessing each property individually, lenders will look at:
- The rental income across all properties
- Profitability across the portfolio
- The loan-to-value (LTV) ratios and your overall borrowing
- Stress-testing to ensure affordability
What are the benefits of a portfolio loan?
The main benefit is the simplified management of your properties. With just one mortgage,, there’s less admin for you to worry about.
Another benefit is that some lenders offer highly competitive rates for portfolio loans, which may be better than what you could access if you were refinancing all your buy to let properties individually.
What are the risks or drawbacks of a portfolio loan?
Whether you are putting two or twenty-two mortgages into a portfolio loan, the lender will want to assess their security so naturally, as there are more properties to consider, this can be a more protracted process than if you are mortgaging just one property.
Some lenders have a limit on the total borrowing in your portfolio, or even the number of properties. This is again due to the risk involved with these types of loans, so it’s best to speak to a broker first to discuss your options.
Furthermore, lenders can restrict certain property types from being included in a portfolio loan. Similarly, if you have one property that’s underperforming or not generating sufficient rental yield, it could impact how much you can borrow.
Can I add more properties to my portfolio loan after I’ve secured my mortgage?
Yes, many lenders will allow you to apply for a further advance to add new properties to your portfolio loan. Naturally, the lender will want to do some checks on the existing portfolio to ensure the numbers make sense, as well as looking at the new addition to the portfolio.
What documents do I need to provide for a portfolio loan application?
As well as the standard documents required for a buy to let mortgage application, you will also need to provide:
- A portfolio spreadsheet that includes all addresses, property values, and rental income for each property
- A business plan if you’re a portfolio landlord
Our brokers will review all your documents before submitting your application to ensure everything is accurate and identify any potential issues that your lender may raise.
Is a portfolio loan right for me?
Portfolio loans can be a great way for portfolio landlords to manage multiple properties with one mortgage. However, they’re not right for everyone, and your portfolio size, properties and investment plans may mean individual buy to let mortgages are better for you.
The best way to explore your mortgage options for your portfolio is to speak to an expert. We’ll complete a free portfolio review to give you a better idea of how your portfolio is performing and suggest new ways to maximise your profits.
Find out more about our Property Portfolio Reviews here >>
Speak to one of our experts
With our whole-of-market access, we’ll look at all the rates available to you to find the most cost-effective solution for your portfolio. Whether that’s with a portfolio loan or standard buy to let mortgages, we’re here to help.
Get in touch with our team of experts on 0345 345 6788 or submit an enquiry here.
