If you are a Buy to Let landlord and own more than four properties, then this could be of interest to you..
In September, the Prudential Regulation Authority (PRA’s) second round of regulation rules will impact the Buy to Let sector. These requirements revolve around the ‘professional landlord’ and specifically anyone who owns more than four properties. These follow the recently implemented phase one, which took place in January 2017, implementing more stringent rental calculations and affordability assessments. The overall aim of the rules is to bring all lenders up to prevailing market standards and guard against any slipping of underwriting standards during a period in which firms’ growth plans could be challenged by the changing economic landscape and the impact of forthcoming tax changes.
So, what does this mean? The new rules require lenders to assess applications using a specialist underwriting process, review and stress test the landlord’s whole portfolio, as well as the individual’s financial capability. This includes those held in a Limited Company name.
Lenders will be required to make sure you are not over exposed and any decision to lend will be made once the whole portfolio has been taken in to account. Each lender will interpret the rules differently and, although still in July with launch just a couple of months away, many lenders have not yet confirmed how they will be looking to change things.
However, the murmurs across the market suggest that some lenders will look at all assets and liabilities, possibly even a business plan for the portfolio, any previous experience in property rental and both property rental and personal incomes. This could also include budget forecasts. As a standard, we expect to see the usual tax returns, three months bank statements and copies of all Assured Shorthold Tenancy agreements being requested.
Therefore, if you are looking to change properties, buy further or reassess current portfolios, you might be wise to do it sooner, rather than after September. Without a doubt, and as with any previous regulatory implementation, lenders turnaround times will be affected as new rules bed in and processes will become slower than usual, for a while at least.