Tougher lending rules for landlords come into force in two weeks – but what effect are they likely to have, and how can you prepare your investments for the changes?
From the end of the month, the Bank of England’s Prudential Regulation Authority will start to enforce stricter lending regulations for landlords with four or more properties.
While the new rules won’t affect everyone, they’re likely to make borrowing more difficult for landlords with larger portfolios.
Buy-to-let rules: what’s changing?
The new rules will only apply to landlords who have four or more properties with existing buy-to-let mortgages.
When you apply for a new mortgage, you’ll now need to show full financial information for every property in your portfolio, rather than simply providing your top-line profits.
This means that, among other factors, lenders will look at the equity in each property, individual rental profits and the geographical spread of your portfolio.
The changes could make borrowing additional funds more time consuming, especially for large portfolios – imagine having to assess fifty properties individually. It could also result in some landlords getting turned down for finance, especially if they are heavily mortgaged or overly invested in a specific local market.