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The implementation of a tougher rental stress test by mortgage lenders at the start of the year, following a review of BTL underwriting standards by the Prudential Regulation Authority (PRA), has the industry gearing up for phase 2 of the new rules. From the 30th of September, providers must carry out affordability on any providers who are classed as a portfolio landlord. By definition, a portfolio landlord is a borrower with four or more distinct mortgaged buy-to-let properties, either together or separately in aggregate.
Lenders will have to stress background portfolios and base lending decisions in the context of your entire “rental business”, in other words, they will take your entire buy to let property portfolio into account when making a lending decision. Your property experience, total mortgage borrowing, assets and liabilities, income, cash flow and how the lending sits within your existing borrowing will all be considered as a result.
Providers such as Paragon and Accord have already confirmed what their criteria will be moving forward, and will continue to support this market.
The increased regulations provide a great opportunity for professional landlords who understand the changes taking place in the industry, so having an expert mortgage broker who understands the BTL market can be a real advantage. The extra requirement will result in applications taking longer to process, so make sure your paperwork is in order upfront.
The documents lenders could ask for are as follows:
- Property portfolio spreadshee
- Business plan
- Cash flow forecasts
- Your last three months’ bank statements
- SA302s and submitted tax returns
- Income and expenditure statements
If you would like to discuss your re-financing options ahead of these changes, let us know and we'll connect you to our independent Mortgage Broker, Lee Langley.