Getting the right financial deal for your property investments is essential. There are many mortgage products available and finding the one that is perfect for you is not an easy thing to do. Each of the hundreds of lenders will have their own pricing and eligibility criteria, and these can change in a heartbeat depending on market conditions.
So even if you are an experienced property investor, obtaining the right financial deal for your next project isn’t easy. We have a number of considerations for you to help you whittle down the options and decide on the best financial deal.
1. How many current Mortgages do you have?
A lender is always going to be interested in the number of mortgages that you currently have. Some lenders will not provide you with another buy to let mortgage if you already have over 3 existing buy to let mortgages.
Other lenders will have limits for the maximum amount of buy to let mortgages you can have active. This can vary from 5 to 10 buy to let mortgages. If you have a portfolio of buy to let properties then you may well have more than 10 buy to let mortgages. You can still obtain additional mortgages with specialist lenders in this scenario.
2. Your Mortgage Balance Total
It is highly likely that any potential lender will want to see your mortgage balance total if you have a portfolio of properties. Some lenders will impose a limit on the amount that they will be prepared to offer you against this.
In addition, there are lenders that have a limit for the total amount they will lend to any individual property investor or limited company. This applies across the entirety of your portfolio. So the bottom line here is that if you already have mortgages with a specific lender they may be reluctant to lend you more.
3. Your Income
Several of lenders will want details of the income that you earn other than rental income. Usually they have a minimum income requirement, which is often around £15,000. Some lenders will have a higher income threshold.
4. LTV of your Portfolio
It is very likely that a potential will want to know the average LTV for your entire portfolio as this provides them with a good current and future risk indication. Potential lenders are going to be more receptive if your average portfolio LTV is low. You will probably get the best rates if this is the case.
5. Portfolio and Property Interest Cover Ratio (ICR)
If you are unaware of what the interest cover ratio (ICR) is, the vast majority of lenders uses it as a stress test for different interest rates. At an individual property level, a potential lender will want to ensure that the rental income you receive from the property is sufficient to cover mortgage repayments should interest rates change.
When you have a portfolio of buy to let properties, you will find that most potential lenders will run stress tests for ICR for your total portfolio. All lenders have slightly different rules when it comes to running stress tests for ICR.
So bear these considerations in mind when you want to arrange your next finance deal. Have all of the relevant information to hand prior to approaching lenders. This will make life easier for you.