Terraced houses in a village

Banking 101 –

Raising Finance to Invest in Property

In the UK, property remains one of the most resilient asset classes. From first-time buyers to portfolio landlords, getting established on the property ladder remains a popular way for many to grow their wealth. Depending on your circumstances and ambitions, the routes to securing finance for property investment can vary.


29th March 2021


Property finance for individuals

Many individuals, who have enough capital, will look to supplement their income by acquiring a second or third property on top of the one they live in. This will almost always involve a personal investment of capital and additional funds secured via a loan or mortgage.

The appeal of becoming a buy-to-let landlord is not just the relatively good performance of the UK residential property market, but the fact that the value of the asset can be increased with a proactive approach to property maintenance and improvement. Until now, property has been a very stable asset class, and is one that empowers the owner to increase its value over and above standard market movements. It is important to note, with any asset class, that previous performance is not an indicator of future performance.

If you’re an individual looking to make this sort of investment, any finance you are able to secure will be contingent on your own circumstances. For example, are you able to show how you would personally cover a shortfall if rental income doesn’t cover interest payments?


Other factors banks consider with individual buy-to-let mortgage applications

Your credit rating

Whether you’re entering the property investment market for the first time or expanding your portfolio, a clean credit score is an essential part of the puzzle. Small issues like missed payments might not make a huge difference, but County Court Judgements or missed mortgage repayments will be a significant barrier to securing the finance you need.

Minimum income

Most lenders in the UK require a minimum income to consider eligibility, but there are options for those with a lower income threshold, and there are even options available that have no income requirements.

Existing portfolio or assets

What lenders are willing to offer you will change depending on if you’re new to property finance or already own properties. Some lenders won’t consider landlords who own several properties, but this varies across the UK.

View from above of a row of terraced houses in Liverpool, England.
A street made up of brick-built apartments and townhouses in South Kensington, London

Property finance for portfolio landlords

Individuals who own four or more mortgaged properties become what’s known as a ‘portfolio landlord’. When you pass this threshold, there are certain expectations on banks regarding due diligence. From here, it’s not just about your own personal circumstances. For example, a bank is required to know the status quo of the rest of your portfolio. They need a deeper understanding of how your assets might interact and will also want to gauge your understanding of the market you’re operating in.

Factors banks consider with buy-to-let applications

  • Do you keep accurate records? There are many conditions to satisfy buy-to-let properties (fire safety certificates, guarantees for electrical items, insurance, etc.) More important still for HMOs: annual gas certificates. If you’re disorganised, cannot produce documentation when asked, or your business approach obstructs a bank’s due diligence, this is a red flag when considering a finance application.
  • The bank wants to know that a buy-to-let landlord is competent: aware of their obligations and best practice
  • A portfolio landlord should understand the market they want to operate in. Banks look for investors who have a good handle on their local area. A speculative application – not rooted in a comprehensive business plan – means more risk for the bank and a higher rate of interest.

Portfolio landlords should make sure they chose a lender who is right for them. If you are vastly experienced, cheaper rates found on the high street can be the right approach. A note of caution here is that as different lenders’ appetites change, it could result in an ongoing dynamic of regular refinancing to achieve the cheapest rate.

Other investors might move away from -the potentially lighter touch relationship approach of the high street, and opt for a longer-term relationship of consistency where their banker understands their circumstances, has years of sector expertise and can tailor solutions to meet their needs.

This is particularly helpful when circumstances change. The pooled collective knowledge of a real estate finance team can be particularly valuable to help a portfolio landlord adapt when circumstances change.

The real estate finance team at Arbuthnot Latham work closely with property investors to build a strong relationship, facilitated by regular contact and a collaborative, entrepreneurial approach.


Further reading


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Related services

Real Estate Finance  •  Buy to Let