There have been so many changes in the Buy to Let sector, that I thought it was time for a general round up.
If you are a professional Landlord, an accidental Landlord or simply thinking of buying one property to rent out to help fund your retirement, read on, as you will be affected!
Since April this year, we have seen the new tax changes regarding mortgage interest phased in. From 2020 landlords will only be able to claim tax credit at the basic rate of 20%, regardless of whether or not they are high rate taxpayers. This will result in many landlords paying high rate tax on their rental income for the first time.
The tax changes have prompted some Landlords to house their Buy to Let properties into a Limited Company. At present the rules allow a Specialist Purpose Vehicle (SPV) to be set up specifically for this purpose. The difference is simply that Ltd company tax rules then apply which in a nutshell means corporation tax (currently 19%) is paid on profit!
Depending on your tax position, this may or may not be advantageous to you and we suggest any existing landlords or anyone thinking about buying a property to rent out takes advice from their Tax Adviser or Accountant.
Read our blog: Why are landlords setting up a limited company to purchase buy to lets?
Since April 2016, Buy to Let investors have been subject to a 3% stamp duty surcharge. This was a strategic move by the Government to discourage first time sellers from hanging on to property at the lower end of the market when they moved up the ladder. It’s a big expense for Landlords purchasing property.
Read our blog: What are the new restrictions being imposed on buy to let mortgages?
The Prudential Regulatory Authority (PRA), have instigated tougher underwriting standards for Portfolio Landlords with effect from 30 September this year. Although different lenders have different definitions of who is a “Portfolio Landlord,” the rule of thumb is a private individual with 4 or more buy to let properties.
Lenders are now asking for minimum incomes for Portfolio Landlords and are unlikely to underwrite portfolios where the total loans exceed 75% of the total property value. They will be looking for applicants to provide documented evidence of income and expenditure, similar to the rules for residential lending.
For a long time, as well as restricting the percentage you can borrow on a Buy to Let mortgage, (around 75% is the maximum) lenders have also imposed a “Stress test.” This means that the amount you receive in rent must exceed the mortgage interest payment by around 145%, assuming the interest rate is around 5.5%.
This is very restrictive in areas where property prices are high and rents have not caught up, often buyers can only borrow around 60% based on those rules.
Lately, lenders have started to be more innovative by offering more generous stress tests to landlords re-mortgaging on a “like for like” basis, basic rate tax payers and also for those borrowers willing to take a 5 year fixed rate. Some of the banks have moved away from stress tests entirely and now assess buy to let applications based on affordability only. In some cases this makes lending more generous, and of course with some applications lending amounts are reduced or even declined.
Read our blog: What is a Buy to Let Stress Test and Why do Mortgage Companies Use Them?
Recently we have seen a shift in the areas investors are buying in. Rental yields are much higher in areas where property prices are lower.
Popular areas we are arranging buy to let mortgages for clients are currently mid Wales, the northeast and the North West.
Buying a house is a big deal, and where you are planning to buy will make a difference financially. In this short blog, we look at the most affordable and most expensive areas and how much you need to be earning to buy in there.
8 days ago
Equity release is a type of mortgage that allows homeowners 55 and over to access money from their property's equity without having to leave their home. This is done by securing a loan against the house which is usually repaid by selling the property when the borrower passes away or has to move into long-term care.
9 days ago
It’s important to ask questions about the property you are interested in before taking that step to make an offer. A little probing can make all the difference between buying your dream house or something that requires a lot of work.
12 days ago
There are millions of homeowners over the age of 60 who are likely to release money from their homes to pay for their lifestyle during retirement giving those who are 'asset rich but cash poor' a way to live out their retirement the way they wish.
19 days ago
The average age of a first-time buyer in the UK is two years older than 10 years ago. This is understandable with managing the cost-of-living and challenges within the economy such as high interest rates making it difficult to get onto the property ladder.
21 days ago
Skipton Building Society launches ‘Delayed Start’ mortgage meaning first time buyers won’t be required to make repayments for the first three months.
According to a survey by Skipton, first time buyers who bought their home in the last five years found that in the first three months of living there, they were spending upwards of £30,000.
26 days ago
If you have recently moved into a property with a garden that requires a little TLC, or you’d like to get on top of your current green space, check out our tips.
29 Apr 2025
High street lender, NatWest, have launched a new product to help first-time buyers purchase a property with assistance from a family member or friend to get them on the property ladder sooner.