If you are a landlord letting out more than four properties, lenders will consider you to be a ‘portfolio landlord’
New affordability rules were introduced in 2017, which mean that portfolio landlords need to meet specific affordability rules for all properties they own, rather than the overall affordability of their portfolio, when applying for new finance.
However, some lenders use a method called ‘top-slicing’ when assessing your application. This allows the lender to take into account any additional income you have, apart from rental income, when they calculate what they are willing to lend you. Top-slicing is unlikely to be appropriate if you have little in the way of disposable income or savings and therefore do not have income to cover unforeseen events.
If you are already a portfolio landlord or you are aiming to grow your property portfolio, you could consider a portfolio mortgage which allows you to have the whole portfolio under one mortgage.
Ltd Company Buy-to-let
Many landlords now operate as a limited company for the purposes of buy-to-let (BTL). Operating in this way will have some financial benefits but is likely to restrict the choice of mortgages available.
With a reduced range of products, you need to choose the mortgage that is best for you. This isn’t just a question of opting for the lowest interest rate and cheapest monthly repayments. Like residential mortgages, buy-to-let mortgages need to be compared in terms of any extra fees that may be applicable, as well as additional benefits they offer.
Consulting an experienced, impartial mortgage adviser is advisable as they can provide expert advice on which product is best for your needs.
Home purchase plans which comply with Sharia law allow you to buy a home without paying interest.
The lender buys the property on your behalf and is the legal owner. You then make monthly payments to the lender which are a combination of rent, charges, and capital repayment. No interest is payable.
At the end of an agreed fixed term, you buy the property from the lender for
the purchase price they paid initially; you then become the sole owner of the property.
There are two types of Sharia mortgages:
Ijara or Ijarah
The monthly rent and capital payments are held by the lender to purchase the property at the end of the term, so your share of the property remains constant throughout the term.
Diminishing Musharaka or Musharakah
You and the lender own the property jointly, with separate stakes. The monthly rent and capital payments go to purchase more of the lender’s share. As your stake in the property increases and the lender’s decreases, your rental payment decreases.
Sharia mortgages are complex products that advice and since 2014 any lender offering these products must offer you an advised service. This involves an assessment of your finances and a recommendation of a product only if is suitable and affordable. The advice also must assess whether a conventional mortgage is more suitable.
As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.