A portfolio lender specialises in financing landlords who own four or more properties. These lenders use different criteria than typical buy-to-let lenders. Knowing when a portfolio lender is required and how they assess applications can save you time, cost and risk. With new PRA rules for portfolio landlords approaching, many lenders have disclosed their varying interpretations. These interpretations have led to significant differences in requirements for portfolio landlords and their brokers. The PRA defines portfolio landlords as those owning four or more properties, but its vague guidance has resulted in inconsistent approaches across lenders.
To clarify these complexities, Connect for Intermediaries has created a comprehensive guide. This table aims to help brokers understand and comply with the diverse requirements set by lenders. Transitioning into this new regulatory landscape requires careful preparation and awareness of the changes ahead.
Why Act Before the Deadline?
Clients seeking remortgages are encouraged to act swiftly. Completing applications before 30 September helps avoid additional documentation that lenders will soon require. Acting early minimises potential delays and ensures smoother transitions into the new framework.
Lenders’ Approaches to Portfolio Landlords
Encouragingly, most lenders are open to portfolio landlord applications. However, there are notable exceptions. Santander, for instance, only accepts remortgages, while Mortgage Trust redirects landlords with four or more properties to its Paragon brand. BM Solutions has shifted from allowing unlimited portfolios to capping background properties at ten.
The PRA’s supervisory statement highlights the complexity of lending to portfolio landlords. This includes factors like total debt, diverse income streams, and property risk concentrations. Although the PRA offers examples, lenders interpret the rules differently, resulting in varied requirements.
For example, Aldermore, Castle Trust, Interbay, and Kent Reliance require business plans. However, only Aldermore, Interbay, Kent Reliance, and Leeds request cash flow predictions. Most lenders also require an asset and liability statement or a portfolio spreadsheet.
How Do Portfolio Lenders Differ from Standard Lenders?
| Feature | Standard Lender | Portfolio Lender |
|---|---|---|
| Number of properties | 1-3 buy-to-let units | 4 or more units (owned or mortgaged) |
| Assessment method | Single-asset underwriting | Whole portfolio underwriting |
| Stress test | Often 125 %–145 % rental cover | Typically 145 %–170 % depending on portfolio size |
| Structure | Personal name only | Personal name or SPV/company |
| Rates & fees | Standard BTL terms | May have higher fees but dedicated flexibility |
The Role of Stress Testing
Stress testing has become a key component of the new rules. Skipton stresses portfolios at 150% of notional mortgage payments calculated at 5.5% rental income. Meanwhile, Kent Reliance uses a more lenient 125% of 5%. These differences in criteria make it vital for brokers to stay informed or work with experienced professionals.
Key Criteria that Portfolio Lenders Use
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Full property schedule – list each property’s value, rental income, mortgage, LTV.
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Cashflow forecasting – project rents, voids, and interest rises.
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Stress testing – many lenders test at 5.5 % or higher interest rate coverage.
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Landlord experience – often requires at least two years’ successful letting history.
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Ownership structure – SPVs or limited companies may be required.
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Concentration risk – high exposure in one area or one tenant type may reduce borrowability.
Brokers’ Role in Ensuring Compliance
In this evolving regulatory environment, brokers must adapt to the diverse requirements of lenders. A clear understanding of the criteria will be crucial for securing mortgages for clients after October. Staying updated and leveraging expert guidance can help brokers navigate these challenges effectively.
Summary & Next Step
A portfolio lender offers specialist finance for landlords with multiple properties. Understanding their criteria and how they differ from those of standard lenders is crucial. If you are growing a property portfolio or refinancing multiple units, consider consulting a broker experienced in portfolio lending. Browse our Specialist Mortgages and full Lender Panel to find suitable options today.
Thank you for reading our publication “Portfolio Lenders UK | Key Criteria & How They Differ .” Stay “Connect“-ed for more updates soon!
FAQ – Portfolio Lenders
| Question | Answer |
|---|---|
| What counts as a portfolio lender? | A lender that supports multi-property landlords and reviews the entire portfolio during assessment. |
| Do portfolio lenders charge higher rates? | Rates may be slightly higher, but lenders offer flexibility and tailored underwriting for larger portfolios. |
| Can I use a portfolio lender with only two properties? | Yes, but standard buy-to-let lenders may offer better terms for smaller portfolios. |
| Should I hold properties in a special purpose vehicle (SPV)? | Many portfolio lenders support SPVs. Review our Buy-to-Let Portfolio guide for detailed guidance. |
| What is a portfolio landlord? | A landlord who owns four or more mortgaged buy-to-let properties. |
| Why do lenders assess the entire portfolio? | Lenders assess overall risk, cash flow, rental coverage, and debt exposure across all properties. |
| Are stress tests stricter for portfolio applications? | Yes. Many portfolio lenders use higher rental cover and interest stress rates. |
| Do portfolio lenders accept mixed property types? | Many accept varied properties, including HMOs, MUFBs, and standard lets, subject to risk limits. |
| Can first-time landlords use portfolio lenders? | Some lenders allow this, but most require at least some landlord experience. |
| Do portfolio lenders offer limited-company products? | Yes. Many lenders offer SPV and limited-company products designed for multi-property investors. |
| How many properties can I hold with one lender? | Limits vary. Some allow 10 properties. Others allow unlimited units across multiple lenders. |
| Are fees higher with portfolio lenders? | Fees may be higher, but lenders often provide specialist underwriting and tailored terms. |
| Do lenders check personal income for portfolio cases? | Yes. Many lenders review earned income, tax returns, and portfolio surplus to assess risk. |
| Can I refinance my entire portfolio at once? | Yes. Many lenders allow full portfolio refinancing or staged refinancing over time. |
| Are portfolio lenders suitable for HMOs? | Yes. Many accept HMOs but may stress test them at higher rates. |