Specialist buy-to-let mortgages:

Portfolio loans

A portfolio mortgage allows a landlord to secure one lending facility against several investment properties. It may also be described as a portfolio loan, blanket mortgage or cross-collateralised facility.

This is different from simply being a portfolio landlord with several separate buy-to-let mortgages. Under a portfolio facility, multiple properties support the same overall debt.

How portfolio mortgages work

The lender takes a legal charge over each property included within the facility. The borrowing may be arranged as one overall loan or divided into sub-accounts, but all the properties provide security to the lender.

The facility might be used to:

  • Refinance several existing mortgages

  • Purchase a portfolio in one transaction

  • Raise capital across multiple properties

  • Consolidate borrowing with one lender

  • Finance properties that are difficult to assess individually

  • Create a facility into which properties can be added or substituted

Portfolio mortgages are available through a relatively small number of specialist banks, commercial lenders and private banks. They can be arranged for properties owned personally, through a limited company or within a more complex investment structure.

Affordability and loan-to-value

The lender will normally assess the combined value, rent and debt across the properties offered as security. A property with a lower rental yield may therefore be supported by stronger income from another part of the portfolio.

Lenders can apply an overall loan-to-value limit and a combined rental coverage requirement. However, they may also impose minimum standards on each individual property rather than relying entirely on the portfolio totals.

See Rental assessments & affordability calculationsfor more detail.

Valuation and legal work

Each property will normally require a valuation and separate legal due diligence. The lender will examine its title, tenancy, condition, planning status and marketability.

Existing mortgages must usually be repaid so that the portfolio lender can obtain the required priority over every property. Where a limited company is borrowing, the lender may also require personal guarantees and a debenture over the company’s assets.

Selling or releasing a property

The release provisions are one of the most important parts of a portfolio facility. A landlord cannot assume that selling one property will simply require repayment of the amount notionally allocated to it.

The lender may require:

  • A specified proportion of the sale proceeds

  • A revised valuation of the remaining portfolio

  • The remaining loan-to-value to stay below an agreed limit

  • Rental coverage to be recalculated

  • An early repayment charge

  • A replacement property to be added as security

These terms should be understood before the mortgage completes, particularly where the landlord expects to trade, develop or dispose of properties during the term.

Benefits and risks

One facility can simplify administration, align refinancing dates and allow the lender to consider the strength of the portfolio as a whole. It may also provide greater flexibility for capital raising and future purchases.

However, the properties become financially connected. A default or shortfall affecting one part of the facility can place every secured property at risk, and moving an individual property to another lender may be more complicated.

Portfolio mortgages can be an effective tool for professional landlords, but the release conditions, valuation basis and cross-collateralisation should be carefully structured with an experienced specialist mortgage broker.