Specialist Mortgage Advice

01. Buy-to-Let Mortgages

Background to Buy-to-Let Mortgages

The provision of private rental properties has seen a renaissance in recent years thanks in part to the arrival of the Buy-to-Let investor. This can be largely attributed to the introduction of mortgages where rental income contributes to the affordability criteria lenders require. With recent low interest rates and low annuity rates many people still see Buy-to-Let as an attractive investment either for an income source or for longer term capital growth or indeed as part of their general retirement planning.

The Buy-to-Let investor has not had it all their own way however. The financial crisis saw the availability of Buy-to-Let finance reduce significantly as lenders began to demonstrate a more conservative approach to their lending practices following the financial crisis.

Fortunately there are many specialist lenders out there who we can work with to secure finance that is right for you, so as a specialist mortgage adviser we can look at the high street lenders but also challenger banks and other finance companies.

Buy-to let mortgages have similarities with normal residential mortgages:

  • you can choose between capital repayment or interest only

  • mortgages interest rates can be variable / discounted / fixed rate or tracker

  • the lenders have to be sure they will get their money back

 

The main differences between a standard residential mortgage and a buy-to-let is that for a buy-to-let the interest rates tend to be higher and the amount of deposit needed as a percentage of the loan is also often greater. With many different lenders it is essential to speak to a specialist mortgage adviser who is not constrained to a very restricted panel to help you get the best possible value product.

Tax treatment of Buy-to-Let properties

As Buy-to-Let properties are an investment, taxation becomes an issue. Both Income Tax and Capital Gains Tax (CGT) can apply as can the value of the estate on death which could also impact Inheritance Tax (IHT) liability.

The 2016 Budget made some changes affecting property investors:

 

  • Changes to Stamp Duty Land Tax (SDLT) payable on property purchases for Buy-to-Let, which will reduce the yield the investment produces in the early years were made

  • The rules around mortgage interest tax relief were also changed. Whereas previously the entire amount of interest payable on a Buy-to-let mortgage could be deducted for tax purposes but this is being phased out and from next year tax relief for finance costs on residential properties will be restricted to the basic rate of Income Tax only. This relief only applies to mortgage interest and interest on loans to buy furnishings, with no tax relief available for repayment of the capital amount. There is some good news however, fees paid when taking out a mortgage can also be offset against tax.

While some buy-to-let mortgages are sold on repayment basis, most are sold on an interest only basis. It is important therefore to understand your tax position before deciding which mortgage repayment basis is best for you.

Some of the more exciting tax planning opportunities for landlords come from the ability to transfer a buy-to-let portfolio to a different tax entity. A Limited Company including a Special Purpose Vehicle can present opportunities to reduce the tax bill by moving the income out of your personal tax liability. There are several ways to reduce and offset SDLT when transferring properties into a Limited Company. We can discuss these with you and then help you further by putting you in contact with respected and experienced Specialist Property Accountants who can give you the confidence that you won’t be left with a substantial tax bill that could have been avoided with up front tax planning.

Different lenders look upon borrowers and their properties in varying fashions. If you would like assistance please call us on 0333 300 1874

Opportunities for older Buy-to-Let landlords

More opportunities exist for older borrowers in the buy-to-let market today than in the past. Lenders historically have been reluctant to loan to older customers as people rarely work until into their old age. However, as buy-to-let is based on rental income as opposed to earned income, some lenders now look favourably upon the older customer.

Until recently many high street lenders have limited their appetite for customers who will have redeemed their mortgage before they reach age 70. However, there are specialist providers who will agree to loans for people in their 70’s at the beginning of their mortgage and allow the term to extend until long after they have received a telegram from the Queen!

 

If you looking to structure your property investment through either a Limited Company or Specialist Purpose Vehicle then for some lenders there is not an upper age limit. There is now an Equity Release provider willing to release equity on properties being used as a buy-to-let with another lender permitting holiday lets on properties where equity has been released. As with many specialist lending solutions these products are only accessible through an mortgage broker like ourselves.

Summary and next steps

Whether you are an existing landlord looking to refinance or else considering becoming a landlord and would like support and advice in getting a great value interest rates, please do get in touch by giving is a call on 0333 300 1874.

 

We have direct access to many residential and commercial mortgage providers and will explore opportunities with numerous lenders who are likely to look favourably upon your individual circumstances.

Please note, all loans are subject to a credit search and valuation.

 

Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.

Ipothica Specialist Mortgage Advice

Here to help you

We are here to help you with your Buy-to-Let mortgages, with anything from re-financing a single residential property, arranging finance for a portfolio of properties moving to a different legal structure or perhaps expanding your property portfolio to include commercial property.

Whatever your need we can help. Either call 0333 300 1874 or else make contact by hitting the button below.