Portfolio mortgage

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  • ts455
    started a topic Portfolio mortgage

    Portfolio mortgage

    Hi Everyone,

    First post, i am a fairly new landlord and have a few questions regarding portfolio mortgages would be really grateful for any assistance that can be provided or just general advise based on experience of portfolio mortgages.

    My situation : I own 2 buy to let properties personally outright + my own home which is mortgaged, 2 years ago i set up a ltd company which owns 1 additional buy to let house outright

    I am looking to expand my Ltd company buy to let portfolio over the coming years, possibly looking to buy commercial property such as offices to covert into flats and will need finance to do so, i understand buy to let portfolio mortgages exist, the 4 property minimum and interest rate stress test but questions i have in mind are

    1) Is a portfolio mortgage through a mortgage broker the best idea or am i better off approaching a finance company ?

    2) Does a portfolio mortgage work in a similar way to a normal mortgage with a fixed rate periods possible for 2,5, 10 years ? Does this mean i need to get each property valued when applying to remortgage when the fixed period comes to an end ?

    3) Can i buy a commercial property with a portfolio mortgage for conversion into flats or will i need separate development finance ?

    4) What i would like is something in place so that should a perfect property come on the market perhaps something that needs a bit of refurbishment i have the finance ready to go without the need for a valuation report, surveyor etc so i am bit more free to do what i want, within reason as long as i can cover the stress test etc

    Any advice you have from experience would be very welcome

    Thank you

  • loanarranger
    replied
    ts455, Welcome to the site.

    Portfolio Mortgages is a lender classification for individuals who own more four or more BtL properties , your own residential property is excluded in this category. This categoryof borrower attracts a different rental stress calculation than those with fewer properties who themselves are NOT Higher Rate Tax payers; the only potential exception is where the BtL Mortgage is being funded with an initial 5 year Fixed Rate where the rental stress calculation is generally more accommodating.

    If you are intending to purchase former commercial units for the singular purpose of converting into self contained flats , the initial funding comes from obtaining a short term bridging facility with the Exit coming from obtaining mortgages secured on each of the flats , each unit having their own leases ( Notethis becomes problematic as lenders have concerns over the exposure within one residential complex by the borrower) or depending how many units are involved obtaining what is classified as a Multi Unit Freehold block where there is no lease but a mortgage secured over the Freehold of the building, the interest rates remain only fractionally higher than normal BtL properties and are similar in terms to HMO’s with borrowings up to 75% or lower depending on the valuation.

    Buying property for refurbishment falls into two categories, light refurbishment and Heavy Refurbishment, the former representing property which only requires either a new kitchen or bathroom plus redecoration , these attract a slightly higher loan to value and lower mortgage rates. The objective of such funding arrangements allow a quick completion knowing that the unit is remortgaged ideally seeking a release of the enhanced capital value. Whilst most lenders will do such Remortgage oncethe property has been owned for a minimum of 6 months there are a minority who will do a Remortgage within this initial period but again the rates may not be the best. In addition there are a small number of lenders who will do BtL mortgages releasing a percentage to acquire the property and obtain a valuation post works and once these have been done and validated by their valuer there is a release of additional monies as reflected by the enhanced value. The drawback to these arrangements is that the legal processes are akin to a straight forward BtL where full searches are undertaken.

    Commercial loans are indeed available for a multitude of borrowing situations but the LtV is generally lower and rates in the 4% plus range.

    I hope this perhaps clarifies the situations as raised and the definition of Portfolio Borrowings.

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