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Pros and cons of multiple buy-to-let mortgages

This article is part of
Guide to Multiple Buy-to-let

Using just one specialist lender will save time at the application stage, according to Christine Newell, partnership manager of Paradigm Mortgage Services.

She says with a multiple buy-to-let deal funds are usually available on an interest-only basis and lenders offering such deals would be able to accommodate a wide range of property types, such as student lets, houses of multiple occupancy, flats over commercial, multiple units on a single title, etc.

Ms Newell says: “This is important if investors widen the type of property they are looking at, as part of their attempt to improve on rental yield. Using an approach via a multi-portfolio provider can often save clients time especially if that is their overriding concern.”

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However, a lot of portfolio investors who have built their number of buy-to-let properties over the last five to 10 years will have a variety of lenders and some of these now do not offer the same schemes as they did in the past.

Many buy-to-let investors with a large portfolio of properties will find their mortgage deals will be on historic low rates and Ms Newell warns when faced with remortgaging they may find the new deals available are not as attractive.

Ms Newell says: “When setting up new or moving existing portfolios the client can get seduced by the mainstream buy-to-let lenders who do not look at portfolio deals, but offer very eye-catching initial rates and special offers therefore investors need to understand where their priorities lie.”

The biggest con for advisers can be the complexity of lending criteria in this area.

If you are starting from scratch and have very little experience of arranging multiple buy-to-let deals for your clients, Ray Boulger, senior technical manager for John Charcol, warns it can be difficult to establish all the different lenders’ criteria on multiple buy-to-let borrowing.

At John Charcol, Mr Boulger says he has all the multiple buy-to-let lending criteria available on the brokerage’s intranet alongside a ‘best buy’ list that is published internally.

He says having this information at their fingertips means his firm’s advisers can quickly see what lenders have limitations so for clients where restrictions are a problem, action can be taken quickly.

Mr Boulger says: “I am sure it [assessing the restrictions and deals] is not very easy for smaller brokers where they may have to do a lot more research on individual cases.

“If you have got details somewhere, whether in your data bank or on pieces of paper, then that is a good starting point. Anyone who wants to do a significant amount of multiple buy-to-let business though would be well advised to take the time recording all the lender’s criteria. You should also make notes of other requirements like rental cover requirements.

“Most lenders want 125 per cent but they do not all use the same pay rate. Some use 125 per cent at SVR plus one while some have 125 per cent plus 5 per cent.”