How Many Buy-to-Let Mortgages Can You Have?

Landlords owning buy-to-let properties can make great returns but also face some serious challenges, funding being one of them. Which is where the question arises of “How many buy-to-let mortgages can you have?” Let’s look at the size of the buy-to-let market, what buy-to-let mortgages are, the limitations lenders impose on them, the strategies landlords adopt to optimise their investment portfolios and how to choose the right property.

Size of the Market

• £36.8 billion buy-to-let mortgage lending between 04/2022 -03/2023
• 2.74 million total UK landlords
• 68% of landlords are over the age of 55
• 8 properties owned in average UK landlord portfolio  
• 667% greatest increase in buy-to-let, Milton Keynes 2021-2022.
• 4.61 million people living in buy-to-let properties in 2022.

Buy-to-Let Mortgages

A buy-to-let mortgage is unlike a residential mortgage as buy-to-let mortgages are not regulated. They are designed for property investors who are looking to purchase properties that they intended to rent out to tenants. They come with their own unique characteristics, including a higher initial deposit requirement of at least 25%, this can vary between 20%- 40%. You can expect lenders to offer buy-to-let mortgages at slightly elevated interest rates and impose stricter lending criteria. When determining the loan amount lenders will assess the expected rental income, they will typically expect the rental income to be at least 125% of the monthly repayments on the buy-to-let mortgage. Note buy to let mortgages are most commonly interest only mortgages, meaning you’d only be paying the interest off every month. Therefore, you need to make sure you have a payment plan in place for the end of the mortgage term. For a more detailed explanation check out our guide “How do buy to let mortgages work?”

The Lender Set the Limits

Lending institutions play a pivotal role in determining the number of buy-to-let mortgages a landlord can have. These lender-imposed restrictions are primarily designed to manage risk exposure. Specific limits on buy-to-let mortgages can vary among lenders. However, it is common practice for lending institutions to cap the number of buy-to-let mortgages extended to a single borrower and or it can be limited by an aggregated borrowing amount with specific requirements that no one buy-to let property borrowing exceeds a certain amount. It is therefore critically important to check each lenders criteria.

The lenders have these constraints in place to mitigate their exposure to any single landlord. But this can pose challenging for landlords that are looking to expand their property portfolios.

Regulatory and Prudential Constraints

In addition to lender policies, landlords must navigate regulatory and prudential frameworks. The Prudential Regulation Authority (PRA) introduced significant changes to curb excessive borrowing by property investors. One of the key changes was the introduction of a detailed affordability assessment of the borrower. Lenders are now required to evaluate a borrower’s, income, credit commitments, expenditure and living cost and the entire property portfolio when considering new buy-to-let mortgage applications. This evaluation ensures that the borrower’s overall property portfolio does not carry excessive debt and that rental income covers mortgage commitments across the board.

Furthermore, the PRA introduced stress testing measures to assess a landlord’s ability to meet mortgage repayments if interest rates rise. Lenders evaluate whether borrowers can handle repayments at interest rates higher than those being applied for.

Strategies for Effective Portfolio Expansion

Strategies to optimise their portfolios:

1. Diversification: Explore diverse investment avenues within the property market, such as commercial properties, student housing, short-term rentals, flats, houses, HMO’s.  Diversification can help spread risk and increase income streams.

2. Equity Release through Refinancing: Unlock equity in existing properties by refinancing.  This will provide you with capital for new investments without taking on additional mortgages.

3. Collaboration: Form partnerships or investment groups with other investors to pool resources and share responsibilities, enabling portfolio expansion.

4. Limited Company Structure: Consider operating within a limited company framework for tax efficiency and streamlined financing.

5. Advanced Financial Analysis: Use advanced financial modelling to assess the impact of varying interest rates and economic scenarios on your property portfolio, aiding in risk management.

6. Continuous Learning: Stay informed about market trends, legislative changes, and financial innovations in property investment. Adaptation is key to long-term success.

Choosing a Property

First of all, decide on the type of tenant you want to rent a property to as they will each have different requirements, different considerations and preferred location. If you haven’t thought this through when it comes to renting out your property you may struggle to find tenants. Remember every day your property is empty you are losing income.

You need to consider how you will manage the property, if you are managing it yourself you willed the property to be close by otherwise you will have travel. If you are planning on using a letting agent to manage the property for you then you do not have to limit your area choice you can choose anywhere there is high demand for rental property.

If you are already a homeowner and looking at buying a rental property in the same area as where you live it is worth remembering that you are already exposed to property there – and therefore looking for a different type of home in a different area might be a good idea.

Look at what other landlords and agents are charging in the area for similar properties. As you will want to make sure the rent you can expect to receive covers all your costs, not only the buy-to-let mortgage payments but also things like insurance, repairs and agent’s fees.

The Path to Informed Portfolio Management

The question of “How many buy-to-let mortgages can you have?” is multifaceted, influenced by lender policies, regulatory guidelines, and your financial acumen as an investor. While constraints are inherent, property investors in the UK can employ strategic approaches to navigate these challenges effectively.

In the realm of property investment, prudent financial planning, astute analysis, and a commitment to continuous learning are the foundations of successful portfolio expansion. By embracing these principles, property investors can chart an informed path to enlarge their buy-to-let portfolios, all while safeguarding financial stability and realising their investment aspirations.

Want to Sell your Buy-to-Let Property?

Landlords whether you’re looking to retire or want to convert your assets into cash if you are thinking I want to sell my buy-to-let property or sell my property portfolio, we at Gaffsy have the expertise to help you.

Gaffsy a leading cash house buyer has funds readily available to purchase your portfolio from you directly. We know that property investors selling their properties on the open market typically have to sell properties separately which can be time-consuming and frustrating. This is why Gaffsy are happy to provide a cash offer for your entire portfolio, or the selection of properties you’d like to sell. Instead of waiting for multiple offers and conducting numerous negotiations, you can sell your portfolio to us as one transaction.

We can buy any buy-to-let property, it can be tenanted, vacant, in need of improvement or renovation, currently squatter occupied, hmo’s, facing repossession or have failed on the open market, no matter the size, condition or location. We have the ability to complete in as little as 7 days, so you can sell your portfolio fast, with zero fees or commission. For a no-obligation free cash offer, simply get in contact with us today.