As originally published in
Bridging and Commercial
It’s nearly a year since the PRA introduced its requirements for the specialist underwriting of portfolio landlords and, while the past 11 months have brought inconvenience for brokers who have had to change the way they work, they have also delivered opportunity.
The way that brokers have traditionally placed BTL cases is no longer appropriate for portfolio landlords. Whereas a BTL transaction was previously driven primarily by the rental calculation, now criteria plays a much more significant role in choosing the right solution for your clients.
Lenders have all introduced their own interpretation of the guidelines and have applied stress tests in different ways, with different documentation requirements. This means that a BTL transaction is now a much more involved process and sourcing systems are rarely equipped to provide the full picture.
Brokers who have adapted best to the changes are those who have taken a considered approach to portfolio landlord business – obtaining a portfolio document upfront that details the properties in the portfolio, mortgage and repayment information and rental income.
Taking this upfront approach also presents more imaginative opportunities for raising finance, with a loan secured across multiple properties in the portfolio. Often, for example, a client might want to borrow up to 85% LTV, which is not likely to be possible with current stress test requirements. But, by reviewing the portfolio as a whole, you could identify opportunity to raise finance elsewhere on multiple properties at lower LTVs.
According to last year’s housing white paper, more than four million households rent their home from a private landlord and UK Finance said that while only 7% of landlords own five or more properties, these larger landlords account for nearly 40% of rented dwellings.
This means that there could be 1.6 million rental properties held within portfolios that could be used as security to structure more imaginative solutions for brokers’ landlord clients, providing them with opportunity to access larger loans and greater leverage to grow their portfolios.
PRA regulations have changed the way brokers work with their portfolio landlord clients, putting greater emphasis in developing a more thorough understanding of their investment portfolio and this knowledge gives brokers a great opportunity to identify new ways of meeting their lending requirements.