Portfolio Mortgages
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Portfolio mortgages are loans which are originated by a lender and then held – kept in portfolio – for the life of the loan. This makes them very different from most mortgages.
A portfolio mortgage allows landlords to place all of their buy to let mortgages under one mortgage. A portfolio mortgage is treated as a single account. Rather than having separate lenders for each property, the entire portfolio is undertaken by one lender, hence one monthly payment.
The portfolio is registered under a limited company and finances and expenditures are treated exactly the same as any other business model. Technically, a portfolio could consist of as few as two properties. However, lender’s would usually class four properties to be the bare minimum for a portfolio.
Portfolio mortgage rates
Buying new properties under a limited company will tend to involve higher rates when compared to purchasing a buy to let using traditional methods. This is because lenders take on more risk as they’re lending to a limited company.
If a limited company goes bust, lenders may find it difficult to retrieve any debts. That being said, as more landlords are using limited companies to purchase properties, lender fees are becoming more competitive.
Portfolio mortgage rates are calculated across your portfolio. If you have ten properties for instance, each property will have its own mortgage rate.
A portfolio mortgage will incorporate each mortgage rate into one single rate. The rate of a portfolio mortgage will generally be the average of mortgage rates across the portfolio.
Lenders often require portfolios to be valued at £500,000 minimum. The rental income generated will also need to be around 120%-140% of the loan repayments.
