The Difficulty of getting a mortgage for Portfolio Landlords

You would imagine that the more properties you have the easier it would be to find finance and the better the terms. But you would be wrong. Because Lenders actually do not like large property portfolios and put many hurdles in their way to borrowing. In this article I want to explore why and consider what solutions there are to this problem which is restricting the growth and development of large professionally run portfolios which would be better placed to meet the Governments requirement for the rental sector

A portfolio Landlord is commonly defined as a Landlord with more than 4 properties.  So not a very large portfolio.

The vast majority of Landlords however do own less than 4 properties so the majority of mortgage products are created for them. And that finance is very much a “Product”. You either fit the criteria or you are rejected.

In our view however 4 properties does not really make you a portfolio landlord. Our definition is Landlords with more than 75 properties. However when you then investigate that market you discover  you are actually talking about a very, very small group indeed. At PLAN we have tried to identify how many there are because we want to encourage them to join us. From our research we believe the number is well below 500 and possibly as low as 200.

So the problem for lenders is that real portfolio landlords which I would define as those with over 75 properties are very thin on the ground and therefore not really worth creating products for.

You can get mortgages but what you will find is you have to jump through lots of hoops to qualify and often what might seem relatively minor points will disqualify you. To give one example of many  Lenders who lend will want full details of every property owned by the property business AND by the Directors of the Company.

So say you have a Company with 400 properties and Directors who separately own another 100 properties of one sort or another. And you are looking to remortgage a property with a value of £100,000 ( in the North of England for example) for £70,000 ie 70%. You will have to give full details of all 500 properties owned directly or indirectly by the Company and the Directors. This will apply even if they are in different company structures so completely unrelated to each other.  You can imagine the time that takes.

As a result those Landlords who have painstakingly built a portfolio of say 150 properties over 25 years have to become experts in mortgage finance, to the extent that some will even open mortgage broking businesses. And it is these hoops that explain why it takes 25 years to build a portfolio of 100 plus properties

By contrast Housing Associations who have access to proper finance have been able to grow from 400,000 properties in 1980 to 2.5 million today and that is divided by only 1,500 associations. That is why the largest Housing Associations have over 100,000 properties

This is a situation which has to change and here at PLAN we are trying to find new lenders who will work with larger Landlords to provide better finance for their needs. If you want to be part of this and have over 75 properties then why not join us.