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PORTFOLIO
LANDLORDS MAY
BE HIT HARDEST
BY THE NEW PRUDENTIAL REGULATION
AUTHORITY
LENDING
GUIDELINES Khalil on Portfolio Landlords
T
he new lending regulations that started to arrive in January have now completed their second phase rollout. For good or ill they are here with us. And it looks like it will be portfolio landlords who will feel the impact the hardest. The first stage The first stage of the Prudential Regulations Authority (PRA) changes was released on 1st January 2017. This concerned itself with ‘affordability calculations’, recommending that lenders increased what is known as the ‘stress test’ rate for BTL mortgage coverage. The test was advised to be increased from a typical 125% of coverage of the rent by the mortgage to 145%. What this means for landlords is that they are likely to be able to borrow less, particularly in areas of low rental yields. And, of course, if they can borrow less they will have to find a bigger deposit to put down on new investment properties. The second stage The second stage was recently bedded down on 1st September 2017. And this, specifically and deliberately, targets portfolio landlords. It aims to introduce much stricter underwriting for those with four or more properties. Lending to portfolio landlords will now be assessed using a specialist underwriting process. In practice, what this means is that, when applying for a buytolet mortgage, portfolio landlords 20 | LATEST HOMES
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must furnish the lender with a wider range of documentation. And this documentation will come under much more rigorous scrutiny. Documentation that portfolio landlords may be asked to provide includes: • Portfolio schedule • Business plan • 12month cash flow forecast statement • Statement of assets and liabilities Landlords are now being assessed on much more than the basis of the property they are investing in. They are being assessed on their entire portfolio and the market trends more generally. What does this mean for portfolio landlords? In simple terms – when combined with the removal of mortgage interest relief and base rate rises – it means that the ability of landlords to quickly build their portfolios will be severely restricted. We have already seen many lenders declining to operate in this space and no longer take on portfolio landlord business. It looks like things are set to get tougher. A portfolio landlord’s dream Yet, wouldn’t it be easier if you could show your lending source that you had guaranteed rent. A stable portfolio is your best bet to borrow on the back of. And guaranteed rent is far from a dream. Khalil’s Rent Guarantee Scheme leases your property from you. In many cases we also may alter their interior to give you an extra room – at no extra charge to you. We then rent your property out for the term of the lease and pay you guaranteed rent every month. That’s regardless of whether the property is occupied or not. We handle all tenant relations, all administration and daily maintenance – so you have no other outgoings, just a regular, guaranteed income hitting your balance sheet every month. A stable portfolio reduces your exposure to risk. And that is exactly what lenders are looking for. Phone: 01273 573960 Mobile: 07984 015669 Email: ahmed@khalilproperties.co.uk Address: 124 Lewes Road, Brighton, BN2 3LG www.khalilproperties.co.uk
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