Not a glamorous topic this week, but one that’s so important!

As rates start to creep up, and property prices are stabilizing/reducing this is something that will become more of an issue. So it’s important that you understand it.

You become a portfolio landlord on your fourth property purchase. And at that point lenders have to check your outside portfolio with some additional checks – it needs to be under 75% LTV, and the rent needs to cover your mortgage payment by 125% (assuming your mortgage interest rate is at 5.5%).

Different lenders do have slightly different rules, and one has just increased it to needing to cover the rent at a rate of 8.5%! (Not 125% though, just 100%).

Simply put, if your portfolio doesn’t work then you won’t be able to borrow any more money.

So what can you do?

1. Keep track of your portfolio as you grow.

2. Think carefully if you’re borrowing more than 75% (I know the 80% products are so tempting but this is why we need to be careful of them!)

3. Diversify your property portfolio if your rental is short – holiday lets, HMOs, and blocks of flats are all ways to increase your income so think about your next steps. A different location may be needed too.

3. Speak to your broker early if you are concerned, there are some lenders who don’t use this, although they are reducing. Be upfront as always!