New affordability rules have been introduced by the Prudential Regulation Authority (PRA) for portfolio landlords. This has made the mortgage application process more complex, and the role of the mortgage broker even more important, as they can provide valuable help to landlords dealing with the changes,
Portfolio landlords are defined as those owning four or more properties with mortgages. When applying for a new commercial mortgage, these landlords are subject to more stringent affordability test. The situation is complex as different lenders apply the new rules in varying ways. This has resulted in some portfolio landlords being refused mortgages, causing them to feel that they are unable to expand their property portfolio.
When considering applications, the lenders look at a portfolio landlord’s whole business rather than just focusing on the property being purchased. As well as the income and expenditure on the landlord’s existing properties, other income sources are considered. In some cases, landlords may need to raise rents to qualify for a new mortgage. Landlords will need to supply more documents to support their application than they are used to.
Many landlords are confused about the changes. The solution is for landlords to use mortgage brokers who are familiar with the different ways in which lenders are applying the new rules. A broker will be able to advise landlords on the best available mortgage deals, and can also help them prepare the paperwork needed to support their commercial mortgage application.