Portfolio landlords warned of catch in new mortgage deals

Portfolio landlords seeking a new mortgage or remortgage are being warned of growing personal guarantee risks.

Purbeck Insurance Services claims personal guarantee demand from lenders has risen from £320,298 last year to £424,140 now.

Todd Davison, Purbeck’s managing director, says: “Limited company buy-to-let mortgages have their advantages but can also pose a serious financial risk. A level of risk that would not be covered by rent guarantee insurance.

“Timing is everything in the mortgage market and further reductions to the base rate could be off the agenda given the recent rise in inflation.  If landlords are looking to remortgage to take advantage of the fall in rates or plan to expand their portfolio as the property market recovers, they should know that that they will, in most cases, be asked to sign a personal guarantee as a condition of the mortgage.  

“The mortgage lender is then provided with direct recourse to the professional landlord’s personal estate should the landlord fall into arrears and there is a shortfall following property repossession by the bank.

“Cutting that risk is key given ongoing uncertainty in the property market. While BTL Landlords must ensure they have property, liability, and rent guarantee insurance in place, it’s also important to consider Professional Landlords Personal Guarantee Insurance.  This type of insurance will cover 80% of an outstanding mortgage if repayments fall into arrears and the lender seeks to take action to recover the property.”