The Happy Tenant Company has announced the launch of its free Mortgage Clinic for portfolio landlords, ahead of the forthcoming underwriting changes.
The residential asset management company has launched the Mortgage Clinic alongside expert mortgage broker Lee Grandin, of Landlord Mortgages and Lend2Landlord, to help prepare and educate portfolio landlords about the changes.
From 30th September 2017, the Prudential Regulation Authority (PRA), part of the Bank of England, will start to enforce tougher lending standards for landlords with four or more mortgaged buy-to-let properties. The changes mean that, for the first time, lenders will need to undertake a full analysis of a landlord’s property portfolio as part of the lending process.
The Happy Tenant Company, which manages £500m worth of property for portfolio landlords, says that landlords need to work with their property management companies and brokers to get paperwork in order, so that they are fully prepared when the time comes to remortgage or borrow on a new property.
Adam Joseph, the CEO of the Happy Tenant Company, says: “The borrower costs that will be taken into account by lenders include everything from management and letting fees, Council Tax and service charges, to repairs, insurance, voids and ground rents, as well as any other costs associated with renting out a property. Lenders will want to know a landlord’s current approach and future plans of portfolio management, which is why we have joined forces with Lee Grandin to help support our portfolio landlords.
“Our property managers keep stringent records of all costs associated with our landlords’ portfolios, which have been crucial following the introduction of stricter affordability tests imposed by lenders at the start of the year. Now, however, this will be even more important, as landlords will need this information as part of their business plan to support new mortgage applications.”
If fewer lenders decide to operate in the portfolio landlord market due to the changes, which will reduce competition, the application process could be further delayed, as those still lending in this sector will be faced with a larger volume of business.
Grandin will be advising new and existing Happy Tenant Company landlords during their monthly Mortgage Clinic on how to get organised to support a smooth application.
He comments: “From October, PRA regulations will set guidelines on how lenders should approach lending to portfolio landlords. It is important that a landlord understands that there isn’t a definitive set of rules, but a general requirement that a landlord’s portfolio rental business is sound, viable and sustainable. It will require that a landlord produces a business plan to support its funding requirements. We perceive that specialist brokers like ourselves, accountants and asset management firms, like The Happy Tenant Company, will play a far greater role in the buy-to-let mortgage funding application process.”
He adds: “Inevitably, the changes will result in less competitive landlords (smaller sized landlords) being squeezed out from the market.”
Are you prepared for the changes? Perhaps you should join the Mortgage Clinic!