Portfolio Bridging Loans: one facility across multiple properties

Portfolio bridging is short term lending secured against several properties at once, or against a portfolio landlord's existing holdings to fund something else. It is how experienced landlords raise money quickly without disturbing the term mortgages they already have, and it is the product that makes the difference between buying the next property and watching somebody else buy it.

It is also the product where the structure matters more than the rate, and where a decision made for a good reason in month one constrains you for years afterwards. A landlord who cross-charges four properties to raise £200,000 has solved today's problem and created a permission requirement on every future sale.

This page covers the structures, how leverage works across a pool of properties, the release price mechanism you will live with, and the cases where one loan across many properties is the wrong answer.

The structures: one loan, many charges

Three ways to do it, and they are not interchangeable.

One facility across multiple securities

A single loan, secured by charges over several properties at once. The lender looks at the pool rather than at any individual building.

Why landlords choose it. One application, one set of legals, one valuation instruction, one monthly interest figure. More importantly, it allows aggregate leverage, which means a lightly geared property can support borrowing against a heavily geared one. That is the whole attraction, and it is worked through below.

What it costs you. The properties are tied together. Selling one, remortgaging one, or doing anything with one requires the lender's consent and a payment. That is the consequence landlords least expect, and it has its own section further down.

Separate loans, one per property

Each property stands alone with its own facility.

Why landlords choose it. Independence. You can sell, refinance or restructure any property without reference to the others. Each one can go to whichever lender suits it best, which matters on a mixed portfolio where a commercial unit and a residential terrace want different lenders.

What it costs you. More arrangement fees, more legal costs, more valuations, more administration. And no aggregate leverage: a property at 75% cannot borrow a penny more however much equity sits in the one next door.

A single charge over one property, funding the whole requirement

The structure that gets overlooked, and often the best answer.

Rather than charging the portfolio, the lender takes a first charge over one property with enough equity to cover the whole loan. We have evidence of exactly this on our index: a £201,000 facility for a partnership of experienced investors with 20 properties, secured by a first charge over a single semi-commercial unit chosen from their portfolio after the lender reviewed it.

Why it works. You get the money, and nineteen of your twenty properties remain completely unencumbered by this facility. No consent needed to sell them, no release prices, no entanglement.

When it does not. When no single property has enough free equity to carry the loan. That is the only real test, and it is worth running before accepting a cross-charge.

Revolving facilities secured on a portfolio

A standing credit line secured against your existing properties, which you draw, repay and redraw. Five lenders on our index offer a genuine one.

One is specifically secured against an existing property portfolio, with no minimum drawdown, a pre-agreed credit limit for onward purchases, and funds accessible in as little as two days. Another completed a £1.5m day one drawdown for an experienced landlord with a mixed portfolio, secured on unencumbered residential and commercial assets, with most of the portfolio valued by AVM.

For a landlord buying repeatedly this is frequently the right structure, because the security is taken once and the interest is charged only on what is drawn.

Cross-collateralisation and the blanket charge

Cross-collateralisation means each property secures the whole debt, not a slice of it. There is no notional allocation of £150,000 to this house and £200,000 to that one. Every property in the pool stands behind the entire facility.

A blanket charge, sometimes called an all monies charge, goes further: the charge secures not just this facility but any other liability you have to that lender, now or in the future. If you later take a second facility with the same lender, the original charges can secure that too.

Two practical consequences landlords routinely miss:

You cannot deal with one property in isolation. Selling, remortgaging, granting a lease, or in some cases even carrying out significant works requires the lender's consent, because every property is part of their security.

A problem on one property affects all of them. A tenant dispute, a fire, a title issue, or a valuation that comes in low on one unit can trigger a facility-wide review.

Check whether the charge is an all monies charge, because it determines how easy it is to get a property back when you want it. Ask for the charge to be limited to this facility if you can.

How leverage is calculated across a portfolio

This is the reason cross-charging exists, and the arithmetic is genuinely powerful.

Take four properties:

Individually, at a 70% cap, B and C cannot borrow a penny. Both are already above it.

Aggregated at 70%, the pool supports £630,000 of debt, which means a further £200,000 can be raised. The equity in A and D carries the gearing in B and C.

That is the proposition, and when a landlord has a lightly geared or unencumbered property sitting idle, it is a good one.

Does the strong genuinely carry the weak?

Yes, but with limits that vary by lender and are rarely published.

Some lenders cap exposure per property as well as in aggregate. A facility might be 70% aggregate with no single property above 80%, which stops the pool being dragged by one over-geared asset.

Some cap by asset class. One lender on our index publishes caps of 75% up to £3.5m on a single unit, 75% up to £3m on an HMO, 75% up to £10m on a multi-unit block, 75% up to £15m on portfolios, and 65% up to £15m on semi-commercial.

Some cap the number of securities. One building society on our index limits one tier of its lending to a maximum of two securities, with multiple securities only available on a higher tier. That is not unusual and it is worth checking before assembling a six property proposal.

Additional security can improve the terms, not just the amount. One lender states explicitly that loan to value is assessed across all securities, and that additional security can lower the rate or allow a loan that would otherwise breach its single security maximum. Another states that higher loan to values are only available with additional security at all. So adding a property to the pool can be a pricing exercise as much as a leverage one.

Minimum property values still apply individually. A pool containing a £60,000 flat may have that property excluded from the security entirely if it falls below the lender's floor, which is commonly £75,000 to £200,000.

We have funded a multi-unit case on exactly this logic: 80% LTV on five flats under one freehold title, which is worth reading for how a lender treats several units as one security.

Release prices, and the thing landlords do not see coming

This is the mechanism you will actually live with, and it is where cross-charging bites.

When you want to sell a property out of a cross-charged facility, you need the lender's consent and you must pay a release price. The property is not released for nothing, and it is not released for the debt notionally sitting on it, because no debt notionally sits on it.

How the release price is set. Usually so that the aggregate loan to value stays the same or improves. Common approaches:

• Ratio neutral, meaning you pay the same percentage of the sale price as the current aggregate loan to value
• Pro rata plus a margin, typically 110% to 120% of the property's share of the debt, so the ratio improves with every sale
• All net proceeds until the facility reduces to a target, which is the most aggressive and appears more often than landlords expect

What that does to a sale

Take the portfolio above after raising the extra £200,000, so £630,000 of debt against £900,000 of value, 70% aggregate. Now sell property D, which had no debt on it at all before the facility.

Before the facility, selling D put £150,000 in your pocket.

That is the consequence, and it is not a trick. The lender advanced money against D's equity, so D's equity is spoken for. But landlords routinely think of the unencumbered property as still being available, and it is not.

Three things to push on:

The basis. Ratio neutral is better for you than pro rata plus a margin.

The consent process. How long does the lender take, and is consent at their discretion or automatic where the release price is paid? Automatic is what you want, because a discretionary consent can hold up a sale.

Whether the facility reduces or the headroom stays available. On a revolving facility, a sale that repays part of the balance may leave that headroom available to redraw. On a term facility it usually does not.

What a portfolio lender wants to see

More than a single property lender, and the quality of the pack visibly changes the answer.

A full property schedule. Address, property type, tenure, current value, outstanding mortgage balance, lender, product type and expiry date, monthly rent, monthly mortgage payment, and whether it is let or vacant. This is the document the whole case runs on, and a well prepared one speeds everything up.

An assets and liabilities statement for you or the company.

Evidence of rental income, typically tenancy agreements and bank statements showing the rent arriving.

Existing lender consents where you are adding a second charge behind someone else, which is its own process and timeline. Our page on second charge bridging covers how that consent works.

A business plan and cash flow forecast on larger cases. One lender on our index requires exactly that for portfolio landlords alongside the assets and liabilities schedule.

Your experience, which on a portfolio case is usually evident from the schedule itself.

Do they stress the whole portfolio, or just the security?

On the bridge itself, mostly just the security, because a bridge is repaid from an exit rather than from rent.

But they stress the whole portfolio for the exit, and that is the part that matters. Where the exit is a portfolio refinance, the bridging lender is effectively underwriting the term lender's test in advance.

The PRA definition applies from four properties. A borrower with four or more mortgaged buy to let properties at the point of application is a portfolio landlord, and lenders must apply specialist underwriting that looks at the whole portfolio rather than just the property being financed. That threshold counts properties held personally and through companies, depending on the lender's interpretation.

The tests applied:

Individual interest cover, typically 125% to 145%. One lender on our index applies 125% for limited companies and basic rate taxpayers and 140% for non basic rate individuals and overseas borrowers, calculated on the lower of the passing rent and the market rent, which catches landlords whose tenants are paying above market.

A stress rate rather than the pay rate, commonly in the range of 5.5% to 8%, with some lenders applying a lower stress to five year fixes and some not.

Aggregate portfolio cover, where total portfolio rent must cover total portfolio payments, commonly at 125%. One lender on our index describes exactly this as a PRA check.

Aggregate leverage. Portfolios above roughly 75% overall loan to value attract noticeably more scrutiny.

Concentration and clustering. Lenders increasingly look at whether a portfolio is concentrated in one area or property type, and at refinancing clustering, meaning whether a large proportion of your fixed rates expire in the same short window. A portfolio with six products maturing in the same quarter is a risk a lender can see even if you have not thought about it.

Top slicing is available from some lenders, allowing cover to fall as low as 90% on the security with other income making up the difference.

Mixed portfolios

Residential, HMO, semi-commercial and commercial in one facility. Will a lender take the lot?

Some will, and it is one of the strongest arguments for a specialist bridging lender over a term lender. We have evidence on our index of a facility secured on unencumbered residential and commercial assets together in one mixed portfolio, with most properties valued by AVM.

Many will cherry-pick, taking the residential and declining the commercial, or taking the commercial at a much lower leverage within the same facility. That is not necessarily bad: a blended facility where the commercial unit is capped at 65% and the houses at 75% still works.

What changes with each asset type in the pool:

HMOs are widely accepted but some lenders cap the number of rooms or require a licence to be in place. Valuation may be on bricks and mortar rather than investment value, which reduces the advance significantly.

Semi-commercial typically caps at 65% to 70% and some lenders limit the commercial element as a proportion of the building.

Commercial brings the valuation basis question with it. A lender using vacant possession value on the commercial unit while using market value on the houses produces a very different aggregate than the headline suggests, and our commercial bridging page covers that in detail.

Anything regulated. If one property in the pool is your own home, or a close family member's, the whole structure changes, because that element is a regulated loan and most portfolio lenders are unregulated. In practice this usually means keeping your own home out of the facility entirely.

The practical approach on a mixed portfolio: ask the lender to confirm in writing the leverage against each asset type before the valuation is instructed, not after. A lender that has quoted 75% and then applies 65% to a third of the pool has changed the deal, and the valuation fee is already spent.

The exit, honestly

Three routes, and the first one is where landlords get stuck.

A portfolio buy to let refinance. The obvious exit and the one most often assumed. The problem is that the term lender applies all of the tests above, and they are stricter than the bridging lender's. A portfolio that passes a bridging lender's security test can fail a term lender's aggregate interest cover test, particularly where rents are below market, where the portfolio is heavily geared, or where stress rates are higher than the landlord expected.

This is the honest warning the page exists to give. Taking a bridge on the assumption that a portfolio refinance will be available is the single most common way landlords get stuck, and the way to avoid it is to have the refinance tested before the bridge is drawn, not after. An agreement in principle from the exit lender is worth more than a lower rate on the bridge.

Selling down. Realistic and often sensible, but on a cross-charged facility the release prices above determine what you actually net, and a sale that produces £45,000 instead of £150,000 may not clear what you needed it to. Model the release prices before you rely on sales as an exit.

A term facility against the portfolio. Some lenders will roll a bridge into a longer commercial or portfolio term product with the same security in place, which avoids a fresh legal process entirely. Where a lender offers both, that continuity has real value and is worth asking about at the outset.

When one loan across many properties is the wrong answer

More often than it is sold as, and these are the cases.

When one property could carry the whole loan. If a single property has enough free equity, use it. You get the same money and the rest of the portfolio stays clean. The £201,000 facility secured on one unit from a twenty property portfolio is the template.

When you are likely to sell within the term. Cross-charging and selling are in tension. If a sale is part of the plan, either keep that property out of the security or negotiate the release mechanism very carefully before signing.

When the properties want different lenders. A mixed portfolio forced into one facility usually means the whole pool is priced and leveraged to the weakest asset in it. Two facilities with two lenders can be cheaper in total.

When you are adding an unencumbered property purely to raise more. Work out what you are trading. On the portfolio above, adding the clean £150,000 property to the pool releases £105,000 of extra borrowing, and in exchange that property can no longer be sold without consent and a release payment. You have converted £150,000 of liquid equity into £105,000 of cash and a permanent permission requirement. Sometimes that is exactly the right trade. It should be a decision rather than a default.

When the facility carries an all monies charge and you intend to do further business with that lender. The charges then secure everything, and untangling it later is harder than you expect.

When the aggregate leverage only works because of one strong property. If removing property A from the pool breaks the facility, you are not running a portfolio facility, you are running a loan against property A with extra complications attached.

How the Portfolio Bridging Process Works with Bridging Finance Broker

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