What is Portfolio Finance?
Over the last few years portfolio landlords have found it harder to fund larger portfolios due to the size limits that have been put in place by some of the lenders. Previously lenders may not have investigated background portfolios in too much detail, however, more and more often portfolio landlords are having their background portfolios looked at and checked to ensure serviceability is within the lender’s appetite, even though they may not be lending on these properties.
This has led landlords to search across a broad range of lenders to ensure that they are getting the best options when financing portfolios. More and more often we are seeing portfolio landlords splitting up portfolios, to enable them to maximise the lending capabilities within their portfolios at the best rate available.
The definition of a portfolio landlord may differ between lender to lender and it is important to receive the criteria of what each lender views as a portfolio landlord. You may have 4 or 5 properties but this may be sufficient to be considered a portfolio landlord in some lender’s eyes.
What are Useful Documents for a Landlord’s Portfolio?
It might be helpful to have:
- A Portfolio Summary
- This should include all of the expected information for a lender to review. These can also be helpful from a portfolio management point of view as they can alert you to other ongoing maintenance and health and safety matters on your property.
- A Portfolio Spreadsheet
- For lenders who do not take into consideration the background portfolio, this may not be necessary, but it is also a useful document for you to use in the event the lenders want a simplistic view of all properties that are in the portfolio.
What Lender’s Requirements for a Portfolio May Include:
- A minimum period of landlord experience.
- Greater restrictions may come in to play when the loan size is greater than a certain sum across the lending groups.
- Lenders stress testing of the portfolio may alter depending on the number of properties that exist. If the number is greater than a certain figure, you may find that the lender in question applies a higher stress calculation, to ensure that their loan is well protected from other affordability problems within the portfolio.
Additional Considerations:
- Lenders may ask for each property in a block to be broken down.
- Some lenders will also want to know how the property is owned so personally or via an LLP or Ltd company structure.
- The majority of lenders will provide the facilities over an interest only basis. Many lenders will allow HMOs on portfolio products, Multi Unit Freehold Blocks and holiday lets within the portfolio.
- There are also a number of specific lenders who focus strongly on the portfolio landlord sector accepting up to 20 properties depending on loan size and with the ability to include some of the properties mentioned above.
- It is important to analyze the options available. This may mean having one overarching lender or potentially splitting the portfolio up amongst a number of lenders which may result in achieving a higher loan to value or better rates.
Provide has several resources for landlords to create an impressive portfolio. We can supply you with Portfolio Summary and Spreadsheet templates making it easier for you to find the right lender. Our team of Financial Experts can look at your portfolio and go over all of your options, to ensure you are maximising its lending capabilities.