There are a number of new buy-to-let mortgage rules coming into force in the end of this month and we therefore have come up with the most important information that you need to know in order to keep up with the changes.
What are the new buy-to-let mortgage rules?
From the end of this month the Bank of England will start enforcing tougher standards for portfolio landlords.
A portfolio landlord is someone who owns four or more buy-to-let mortgaged properties. (This will not include unencumbered properties or properties on consent to let.) However, the rules will apply to those who own three rental properties and want to take out a mortgage on a forth.
As of the end of September 2017, in order for you to apply for a buy-to-let mortgage on your forth property (or any consequent property) you will need to submit a business plan outlining your entire property portfolio to the lender before they will make a decision on what deal they can offer on a single property.
For example, if you have six properties and four are generating enough rental income to cover mortgage payments and then some, but the other two are not, your new mortgage application may not be approved by some lenders.
You will also be required to submit a business plan, cash flow projections of your entire portfolio to support your application.
Who will be affected?
The new rules simply outline the “complexities” of being a portfolio landlord. In practice, this should hopefully not affect borrowers who plan on maintaining their existing portfolios, however, if you are planning on purchasing a new property or take our additional borrowing, then you will e affected.
Mortgage advisers suggest that a few lenders are likely to withdraw as a result of new rules. Santander have already advised that they will not lend to portfolio landlords for purchases r additional borrowing. While there are also other, like Natwest, who have improved their offering.
Should I be doing anything?
It may be too late for you to try and arrange a new deal now but it may be a good idea to try and cut costs wherever possible. Cutting your interest costs by re-mortgaging and getting an up to date rental valuation on your property may be a good idea.