What is BTL portfolio lending and what are the benefits? It’s not to be confused with a portfolio landlord (four or more mortgages). It’s when one lender takes multiple properties on one loan.
Very few lenders can do this and it tends to be the banks, both high street and challenger and a few specialist lenders.
The question I get asked a lot from professional landlords is when should I do this? There is no definitive answer as every portfolio is different.
If you are considering restructuring your portfolio as part of tax planning then review your finances at the same time.
– You go from a number to having a relationship with a manager who understands property.
-Greater flexibility if a property becomes empty as rental cover calculated across the portfolio.
-Can be lower costs in setting up the loan as reduced valuation fees and legal costs.
-Option for 100% on purchases if there is headroom within the security calculation.
-Low pricing if loan is for 3-5 years increasing cash flow.
-Administration easier as one account as less lenders to deal with.One direct debit for all properties and only one lender discussion at renewal time.
-Performance Covenants: eg: Minimum LTV, rental cover, net assets.
-Provision of regular information to the lender including accounts, portfolio lists.
-All rents may have to go through the same bank where the loan is and all monies in these current accounts can be used to offset the loan balance if things don’t go to plan.
-Some lenders will only commit for three or five years and then you renegotiate so further valuation fees, set up fees, possible increase in rate. Others will do twenty-five.
-Lenders may require regular valuations on the portfolio which you will pay for.
-Cross default clauses. If you have a problem on one loan it affects all the others with the same lender.
-Consolidation clauses. If you sell a property they may take 100% of proceeds.
-Usually on repayment basis so lose benefit of cash flow if that’s you want.
-Ideally £1m loans + to get the best rates.
-Less brokers to assist you due to the complexity
At Searchlight we have experience in arranging these facilities and we’d be happy to talk you to about your finance requirements. Please contact us by phone or email.