Landlord finance glossary

    This glossary defines the terms UK landlords meet when raising money against a rental property, from rent advances and receivables purchases to MEES, Section 24 and HMO licensing. Each definition is written to stand on its own.

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    Rent advance
    A rent advance is a lump sum paid to a landlord in exchange for an agreed portion of the rent that property will produce in future. Factored advances UK landlords £1,000 to £75,000 within 24 hours of approval, repaid from rent already being collected. Rent advance for landlords.
    Rent factoring
    Rent factoring is the sale of future rental income to a finance company at a discount, in return for cash today. It applies the principles of invoice factoring to residential tenancies. What is rent factoring?.
    Receivables purchase
    A receivables purchase is a transaction in which a business sells the right to money it is owed in future. A Factored rent advance is a receivables purchase rather than a loan, because Factored buys future rent rather than lending against the property. Is a rent advance a loan?.
    Future rental income
    Future rental income is the rent a tenanted property is expected to generate over the months ahead. It is the asset a rent advance is priced against.
    Bridging loan
    A bridging loan is a short-term loan secured against property, usually for a few months, used to cover a gap in funding. It requires a valuation, legal work and a charge on the property, and interest is charged monthly. Rent advance vs bridging loan.
    Second charge
    A second charge is an additional legal claim registered against a property that already carries a mortgage. It ranks behind the first mortgage and requires the first lender's consent in many cases. A Factored rent advance places no charge on the property. Rent advance vs second charge.
    Remortgage
    A remortgage replaces an existing mortgage with a new one, often to release equity. It resets the interest rate, can trigger early repayment charges, and typically takes several weeks. Rent advance vs remortgage.
    Early repayment charge (ERC)
    An early repayment charge is a fee a mortgage lender applies when a borrower repays or refinances before the end of a fixed period. It is commonly 1% to 5% of the outstanding balance.
    Loan to value (LTV)
    Loan to value is the ratio of borrowing to a property's market value, expressed as a percentage. Buy-to-let lenders generally cap LTV around 75%.
    Buy-to-let mortgage
    A buy-to-let mortgage is a mortgage used to buy or refinance a property that is let to tenants. Affordability is assessed mainly on rental income rather than the landlord's salary.
    Portfolio landlord
    In UK lending rules a portfolio landlord is a landlord with four or more mortgaged buy-to-let properties. Portfolio landlords face additional underwriting checks across the whole portfolio.
    HMO (house in multiple occupation)
    An HMO is a property rented to three or more people from more than one household who share facilities such as a kitchen or bathroom. Larger HMOs require a licence from the local council. HMO conversion finance.
    HMO licensing
    HMO licensing is the local authority permission required to operate certain shared houses. Conditions typically cover room sizes, fire safety, amenities and management standards.
    EPC (Energy Performance Certificate)
    An EPC rates a property's energy efficiency from A to G and is valid for ten years. A valid EPC is required before a property in England and Wales can be let. EPC upgrade funding.
    MEES (Minimum Energy Efficiency Standards)
    MEES are the regulations that set the minimum EPC rating at which a property in England and Wales can legally be let. The current minimum is E, with government proposals to raise it to C for rented homes.
    Retrofit
    Retrofit is the upgrading of an existing building's fabric and systems — insulation, glazing, heating controls or heat pumps — to reduce energy use.
    Section 24
    Section 24 of the Finance (No. 2) Act 2015 restricted the deduction of mortgage interest from rental profit for individual landlords, replacing it with a 20% tax credit. It can push landlords into a higher tax band on income they do not keep. Funding a Section 24 tax bill.
    Section 21
    Section 21 of the Housing Act 1988 allowed landlords in England to end an assured shorthold tenancy without giving a reason. Its abolition is central to the Renters' Rights reforms.
    Assured shorthold tenancy (AST)
    An AST is the standard form of private residential tenancy in England and Wales, giving the tenant a right to occupy in return for rent.
    Void period
    A void period is time during which a rental property has no paying tenant. Rent stops but the mortgage, insurance and service charges continue.
    Rental arrears
    Rental arrears are unpaid rent owed by a tenant. Arrears create an immediate cashflow gap for the landlord even when the debt is eventually recovered.
    Rent guarantee insurance
    Rent guarantee insurance is a policy that reimburses a landlord for rent lost through tenant default, usually after an excess period and subject to referencing conditions. It protects against loss but does not release capital. Rent advance vs rent guarantee insurance.
    Personal guarantee
    A personal guarantee is a promise by an individual to meet a company's obligation if the company cannot. It is common in commercial lending to limited company landlords.
    SPV (special purpose vehicle)
    An SPV is a limited company set up solely to hold and let property, usually under SIC codes 68100, 68209 or 68320. Many UK landlords hold buy-to-let property through an SPV for tax reasons. Limited company landlords and rent factoring.
    Yield
    Gross rental yield is annual rent divided by property value, expressed as a percentage. Net yield deducts running costs such as management, maintenance and insurance.
    Equity release (property)
    Releasing equity means converting part of a property's value into cash, normally by borrowing more against it. A rent advance releases cash from income instead of from equity. Raising money without remortgaging.
    Charge on property
    A charge is a legal interest registered at HM Land Registry giving a lender a claim over a property. Registering or removing a charge involves legal work and time.
    Valuation (property)
    A valuation is a lender-instructed assessment of a property's market value, used to size secured borrowing. It typically adds days or weeks and a fee to a funding process.
    Underwriting
    Underwriting is the assessment of an application against a funder's criteria. For a rent advance the focus is the tenancy and rental income rather than the landlord's borrowing history. Landlord finance eligibility.
    Advance rate
    The advance rate is the proportion of the receivable a funder pays upfront. In rent factoring it determines how much of the agreed future rent the landlord receives as a lump sum. Costs and fees.