New buy-to-let lending rules are set to take effect this month, with firms now expected to adopt a much tougher approach to affordability testing.
The Prudential Regulation Authority (PRA), part of the Bank of England, oversees and regulates the conduct of banks, building societies, credit unions, investment firms and insurers.
From September, the PRA is imposing stricter criteria on buy-to-let lenders, meaning that mortgage companies will have to take a closer look at landlord finances when assessing an application.
This year has already seen the introduction of new rules around affordability, and lenders must prove that a borrower can meet buy-to-let mortgage repayments if interest rates were to reach 5.5 per cent.
Now the latest set of requirements will affect portfolio landlords with four or more mortgaged properties. Under these new measures, lenders will have to assess the entirety of a portfolio before making a decision on a single-property application.
If you are thinking about acquiring a new rental property to add to an existing portfolio, then you need to be aware of these changes. The new rules state that the whole portfolio must be viable, which means that if one property’s rental income falls short, even if you use other properties to offset the loss, this could result in an unsuccessful buy-to-let application.
Other factors which may be taken into consideration may include alternative sources of income, location of the properties and past experience in the buy-to-let market.
This is as good opportunity as any to look carefully at your existing portfolio and spring clean your finances.
Working alongside a broker and getting all your paperwork in order now should mean that you’ll be in a good position to satisfy all requirements when you’re ready to approach a lender further down the line.
Our team is experienced in working with first-time landlords and multi-property portfolios. If you would like to speak to us about letting out your property with us, call the team on 01257 547062.