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Mortgage Advice Bureau (Holdings) Plc

Is it time for an annual portfolio review?

With the new portfolio lending criteria that came into effect last October, it’s more important than ever to make sure you carry out a review of your property investments at least once a year, to check how they’re performing and whether your capital is still in the best place, working as you want and need it to.

Here are five key areas you should be looking at:

  1. Do your LTVs stack up?

If you already have four or more properties or are planning on buying your fourth this year, you must ensure the total borrowing across your portfolio does not exceed 75% loan to value. Although the majority of landlords have overall LTVs of below 60%*, those who borrowed at 90%, thanks to deals that were available pre-credit crunch, might find the next few years somewhat of a challenge.

If you fall into that category and were either planning to refinance to pull out some capital or your mortgage term is coming to an end, unless your property has grown sufficiently in value, you may struggle to meet your goals.

For example:

  • Purchase price in Jan 2008 £150,000
  • 90% LTV mortgage (int. only) £135,000
  • Value in 2018 £176,805
  • (average UK house price increased by 17.87% between Q1 2008 and Q4 2017)**
  • 75% max LTV mortgage (int. only) £132,604

In this case, the landlord would have to invest more capital in order to remortgage, as there is a shortfall of £2,396 in the repayment of the original borrowing.

So, if you haven’t done so already:

  1. Check the LTV of each mortgage
  2. Find out how long the remaining term is
  3. What is the outstanding loan amount

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.