The times they are a-changing

The underwriting standards for buy-to-let lenders now mean much more rigorous background checks for potential borrowers – particularly ‘portfolio landlords’.  The rules state:

“A landlord will be considered to be a Portfolio landlord where they have four or more mortgaged buy to let properties across all lenders in aggregate”

In reality this will depend on the individual lender, but expect serious checks into affordability from lenders.

Most lenders prefer their customers to have an income in addition to any rental income.  However, lenders that understand the professional landlord take more of a pragmatic approach to those with a number of properties.  They can see that if the existing properties are well managed, the overall risk is less as the borrower can weather the occasional untenanted period much better.

Lenders will be asked to ensure that landlords are not over committed, which means landlords need to be prepared to be asked for:

• Assets and liabilities, including tax liability
• SA302s
• ASTs
• Current rental accounts underpinned with evidence from your bank statements
• Historical and future expected cash flow from your portfolio
• The total amount of mortgage borrowing you have across your whole portfolio
• Income and expenditure statements.
• An outline of your property investment experience
• How any new lending fits into your property business plan
• Income, both from property and elsewhere

The inevitable outcome of this more intrusive underwriting, will be an extension to the time taken to process a mortgage application, particularly in the first few months. Past experience shows that lenders tend to apply any new directive from regulators, over zealously.  They live in fear of being held to account for not applying the new directive when they get their FCA inspection.

I believe this represents a massive opportunity for anyone that can buy a property without the need for a mortgage.  Sellers are going to get fed up with the time the buyer is taking to get their mortgage approved and put their property back on the market.

One investor who was applying for mortgages with an lender already applying the Portfolio Landlord underwriting criteria has contacted me recently saying he has recently lost two potentially lucrative deals for precisely that reason.

Investors who can complete fast, within 28 days, by using either cash or bridging finance will be highly prized by sellers in the coming months.  I see a real opportunity to grab more deals, complete quickly, then remortgage.

Of course, I teach investors exactly how to do this.  You can find out more at www.ninjainvestorprogramme.co.uk

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