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!

Tax Changes

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.

Ltd Company Buy to Lets

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?

Stamp Duty

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?

Portfolio Landlords

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.

Stress Tests

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?

Area

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.

Recent posts

Buying a property, especially in the current climate, is a big decision for first time buyers. We have listed a few tips that can help you buy your first propertyy

Does the time of year make a difference in house purchases? The answer is, yes and no.

The popularity of buying a house can vary depending on various factors such as regional trends, how the economy looks, and of course personal circumstances. 

If you are looking at putting your house on the market, you may want to consider giving your garden some TLC. Small changes can make your outside space a lot more attractive to potential buyers resulting in a faster sale.

Getting on the property ladder is a big milestone in life, and is not something to take lightly. There are several things to take into consideration such as saving up for a deposit, finding your dream home, and finding the best mortgage product to suit you. Here we look at UK first time buyer statistics.

If you are struggling to get over the hurdle of saving enough deposit due to being in a rental property, but wish to purchase your own home, you may be able to with a 100% mortgage. You will need to meet certain requirements and be financially stable.

If you are looking at remortgaging your property but you are unsure whether it’s the right decision, we have listed five reasons why it might be for you.

As the cost-of-living crisis continues, many people across the UK are struggling financially, many of whom are finding it hard to get debt-free.

According to research by StepChange, there are five common reasons people don’t seek help and advice with debt concerns.

Friyay Rate Reviews

6 Feb 2024

Every Friday our experts search the market for the latest rates from every lender saving our clients some serious £'s!