Staying on top of the buy-to-let mortgage market has become a job in its own right.
Some changes are small and relatively inconsequential – the inner workings, or behind the scenes details, if you will, that we tackle as part of the mortgage application process and that don’t need to burdened on our clients.
Others, such as the upcoming Prudential Regulation Authority changes, which will be applied by 30 September 2017, do need some light shed on them.
After all, current landlords and those in the process of applying for a buy to let mortgage are coming to us and asking ‘what does it mean for me?’.
In order to make the information accessible to everyone, we’ve prepared our Prudential Regulation Authority changes made simple.
This should clear a few things up, however if you still need clarification then please call a member of the Complete Mortgages team on 01483 238280, who will be more than happy to help.
So, if you’re a landlord and wondering ‘how will the new buy to let rules affect me?’, then read on.
1. Size matters
As part of what appears to be a crackdown on buy to let landlords who have ‘stockpiled’ mortgaged properties, the new rules really impact those who have four or more properties within their portfolio.
It’s also important to note here that the figure of four doesn’t relate to the number of mortgages you have – but the number of properties. If you own four properties under one mortgage then you will still be treated as a portfolio landlord. If you have two or three mortgaged buy to let properties, the new lending criteria will not affect you.
2. Down to the last detail
If you currently own three buy-to-lets and are looking to buy a fourth, or if you already own four and are looking to buy more, then you will be required to prove that your other properties – or at least your ability to cover the cost of the other properties – won’t be affected by taking on another.
To do this, lenders will:
a. Want to review income from other sources – including that derived from your existing portfolio – to ensure that can cover maintenance and void periods
b. Assess your experience as a landlord
c. Apply an Income Coverage Ratio, which is dependent on a number of factors including all your earned income. Note: this will vary from lender to lender
d. Require full details of the entire portfolio in order to assess the overall risk, potentially including assets/liabilities, cashflow and investment intentions.
Essentially, lenders will want to carry out stringent checks to make sure that taking on an additional property – or properties – will not be too much of a financial stretch.
3. Getting personal
Of course, as part of these checks, lenders will also want to know your personal liabilities and outgoings, too.
Expect the following areas to be explored as part of the review:
a. Credit cards and their balances
b. Vehicle financing agreements
c. Loans
d. General outgoings
The buy to let mortgage market is a constantly evolving sector. As a result, it’s important that you don’t get caught out.
As a Guildford mortgage broker our advice for buy-to-let landlords is to contact a mortgage adviser to find out how the new changes might affect you personally.
Likewise, we recommend that all new and aspiring landlords find a reputable mortgage broker to advise them on how to apply for a buy to let mortgage in the context of the impending new rules.
Contact Complete Mortgages on 01483 238280 or email info@complete-mortgages.co.uk. Remember, we also offer specialist mortgages including limited company buy to let mortgages, equity release mortgages and adverse credit mortgages.
By Mark Finnegan, Director at Complete Mortgages
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