Portfolio finance and loans for landlords

Portfolio finance is lending to a landlord secured across several rental properties, rather than one mortgage per property arranged separately. It can mean moving a whole portfolio to one lender, a single loan secured on a group of properties, or a facility that funds further purchases. Lenders assess the rent, value and borrowing across the whole portfolio.

The term overlaps with portfolio mortgages and portfolio loans. Most landlords still hold one mortgage per property, but a growing number refinance groups of properties together to simplify their borrowing and release equity.

Refinancing a portfolio moves several properties to a new lender at once, often when deals end around the same time or when a landlord wants one lender for all their borrowing. Lenders value each property, check the rent on each one and look at the overall rent cover, loan-to-value and the landlord's experience and other income.

Some lenders offer a single loan secured on many properties, which can suit landlords with mixed property types or properties that are hard to mortgage on their own. Others keep separate mortgages under one review. Early repayment charges on existing deals can affect when refinancing makes sense, so mapping the end dates of each deal helps with timing.

Many landlords grow a portfolio by remortgaging properties that have risen in value and using the equity as deposits on new purchases. Lenders check that each property still passes the rent test at the higher loan, that the portfolio as a whole remains affordable, and that the plan for the money is sensible.

Raising money increases borrowing costs across the portfolio, so the extra rent from new purchases needs to cover the extra interest with room to spare. Testing the plan at higher interest rates gives a fuller picture of the risk.

The four-property rule and the documents lenders ask for are explained in the guide to portfolio landlord rules, which covers stress tests and business plans.

Portfolios held personally, in a limited company or in a mix of both are all financed in the market, though some lenders deal only with one type of ownership. A landlord with properties in several companies may need a lender that will look at the connected companies together, and some lenders offer facilities to groups of companies.

Moving properties between personal and company ownership is treated as a sale for tax purposes, so restructuring a portfolio needs tax advice before any refinancing.

Landlords who buy properties needing work often use short-term bridging finance first, then refinance onto a buy-to-let mortgage once the work is done and a tenant is in place. Some portfolio lenders will refinance from bridging quickly, and a few offer both. Planning the exit at the start keeps the costs of short-term lending under control.

Commercial and semi-commercial properties in a portfolio, such as flats above shops, are financed by fewer lenders and may need a commercial mortgage instead.