How to Beat the Tax Changes – More Rules for Landlords
Landlords who own four or more mortgaged buy-to-let properties can soon expect lenders to look across their whole portfolio if they want to apply for a mortgage on a new property.
Under Prudential Regulation Authority (PRA) rules, from the end of September lenders will have to take into account all the buy-to-let properties you have a mortgage on when deciding whether to lend.
This is so they can be certain landlords will be able to afford any new addition both now and if interest rates rise in the future.
Current best deals include a Buy-to-Let loan with an initial rate of just 1.34% (based on a mortgage of £125,000 at 50% LTV, correct as at 2nd Aug 2017)
What impact will this have?
So far, not many lenders have confirmed exactly how they intend to implement the new rules.
Some, however, have indicated that they may no longer offer mortgages to those with larger property portfolios, which could mean mortgage choice becomes more restricted.
Those who do continue to lend to portfolio landlords are likely to want to see more information about the portfolio as a whole, including details of rental income, as well as landlords’ overall costs and personal income and tax liabilities, to ensure that landlords aren’t over-exposed.
This means that portfolio landlords may have to produce larger quantities of paperwork to support their mortgage applications, so it’s important to ensure all records are up to date.
How to prepare for the changes
If you are a portfolio landlord and are planning to remortgage or add to your existing properties, you may want to consider acting sooner rather than later.
If you haven’t reviewed your buy-to-let mortgages for a while, it’s therefore worth checking the rates you are on now to see if you might be able to remortgage to a better deal.
Some lenders may also adopt a less restrictive approach for landlords who are basic rate taxpayers, as tax relief changes introduced in April which restrict the amount of tax relief they can claim only affect higher or additional rate taxpayers.