Portfolio landlords seeking new or refinanced mortgages are encountering rising risks associated with personal guarantees, according to recent findings.
Purbeck Insurance Services reports a notable increase in personal guarantee demands from lenders. Last year, the average personal guarantee required was £320,298, but it has surged to £424,140 this year.
Todd Davison, Managing Director of Purbeck Insurance Services, highlights that while limited company buy-to-let mortgages offer certain benefits, they also introduce significant financial risks that are not covered by traditional rent guarantee insurance.
Davison comments, “The timing of mortgage decisions is critical, especially given the current inflationary pressures. Prospective borrowers hoping to benefit from potential base rate cuts or to expand their property holdings should be aware that personal guarantees are now a common requirement for these transactions.
“Lenders are increasingly requiring landlords to sign personal guarantees, which means that in the event of arrears or repossession, the lender has direct access to the landlord’s personal assets to recover any outstanding debts.
“To mitigate this risk, it is crucial for landlords to secure comprehensive insurance coverage. In addition to property, liability, and rent guarantee insurance, landlords should consider Professional Landlords Personal Guarantee Insurance. This insurance can cover up to 80% of an outstanding mortgage if repayments are missed and the lender initiates recovery actions.”
