How new PRA changes will affect portfolio landlords.
This year we have seen a number of significant changes to how our lenders will assess your Buy to Let Applications.
From the 30th September 2017, the PRA (Prudential Regulation Authority) will require all lenders to implement changes to the way in which buy to let mortgage applications are underwritten for Portfolio Landlords.
The PRA defines these Portfolio Landlords as “borrowers with four or more distinct mortgaged buy-to-let properties, either together or separately, in aggregate”.
What exactly is changing?
The PRA expects all firms that conduct lending to portfolio landlords to use a specialist underwriting process that takes into account new complex borrowing scenarios.
This will require your entire portfolio to be underwritten, even if your other mortgages are with a different lender. Lenders will also now be required to use additional affordability tests and will require even more documentation to support applications causing delays in underwriting decisions.
Lenders will now be assessing the following:
- Affordability – with Interest Coverage Ratio as a key factor.
- Your full portfolio and property experience.
- Full assets and liabilities breakdown.
- Total income schedule.
- Cash flow statements for each property.
- Your property business plan.
In addition to the above you must also be prepared to provide:
- Up-to-dated property portfolio schedule,
- Your last three months’ bank statements, both business and personal,
- Submitted tax returns.
- ASTs for all properties.
What can you do to prepare for the changes?
- Get your business and personal paperwork in order.
- Keep your property portfolio schedule up-to-date.
- Be aware of the extended underwriting process.
It is vital that as landlords you are fully aware of how these changes will impact your current and future plans to grow and develop your portfolio.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Some buy to let mortgages are not regulated by the Financial Conduct Authority
The Partner Practice represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products. The title ‘Partner Practice’ is the marketing term used to describe St. James’s Place Wealth Management representatives.
Alexander Associates Mortgage Brokerage Limited is registered in England No.3327524.
Registered Office: 117 Piccadilly, London W1J 7JU.