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.
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.
5 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.
8 days ago
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.
‘Buy Now, Pay Later’ (BNPL) schemes, such as ‘Klarna’ are short-term loans that allow shoppers to make a purchase, but delay paying for it for an agreed amount of time.
Klarna is one of the most popular BNPL services with 18 million customers in the UK alone, and offers interest-free payment options which is appealing to shoppers. However, does it affect a mortgage application?
14 days ago
We look at how to get the best Buy to Let mortgage rate, what's in store going forward, and options as a landlord with increasing costs.
23 days ago
Throughout this past week, lenders have continued to reduce their mortgage rates giving borrowers in the UK some welcome news following the change in global tariffs under US President, Donald Trump.
23 days ago
Did you know that buying a house, or relocating is in the top 10 most stressful life events?
Stress of course is an unavoidable part of life and there are many reasons why people experience stress, not just buying a house!
There are lots of effective ways to manage and reduce stress, check out our tips to help you.
With the stamp duty relief ending in England and Northern Ireland, we have listed the top 10 cheapest areas for first-time buyers as published by Rightmove.