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  • Mortgages & Finance

    Buy-to-complexity and the value of expertise

    The buy-to-let market has provided many investment opportunities for amateur and professional landlords alike in the pre-Brexit decades and survived the credit-crisis relatively unscathed. It has thrived despite lending restrictions, increasing government intervention and attempts to dampen the market, proving its resilience once again. It is likely to continue thriving in the post-Brexit epoch too.

    The key drivers of the market such as tenant demand and the UK housing shortage are still prevalent, however, the culmination of recent events and changes is creating a new environment for buy-to-let investors. An environment that is becoming increasingly complex. It is for this reason that the buy-to-let sector may become more definitively the domain of professional landlords as amateur landlords, who feel unsure of the current housing market and are deterred by the recent tax changes, refrain from investing in rental property.

    Professional landlords with a property portfolio, considerable equity and an entrepreneurial mindset are likely to be more comfortable with the current uncertainty. They may also see any market instability as an opportunity for them. Professional landlords are also more likely to have already set-up a limited company to hold their properties and be less affected by the new tax regimes.

    While the buy-to-let sector as a whole has become more complex, so has the buy-to-let mortgage market as lenders are starting to adapt their propositions, in anticipation of further lending restrictions being imposed in the near future. This is likely to result in more stringent affordability tests for landlords.

    The first criteria changes in response to the Prudential Regulation Authority's recommendations have been an increase in rent stress ratios for a number of lenders. However, these increases are not always applied across the entire product range. For example, Foundation Home Loans has a 145% calculation for its core range, but a 125% calculation for limited companies. Similarly, Paragon Mortgages has different rental calculations for standard properties, HMOs and limited companies.

    Kent Reliance has a mind-boggling array of rental calculations – 7 in total. There are different calculations for inexperienced landlords, experienced landlords, single units, multi-units and the number of rooms in the property. Not forgetting the separate pay rate rental calculation for its 5 year fixed rates. These different rental calculations have been intelligently applied, but it does emphasise how tricky it can be to find the most appropriate product for landlord clients. This is the type of scenario where the help of a buy-to-let mortgage specialist such as Property Tribes Mortgages can really provide added value.

    With any major change such as leaving the EU, it is realistic to prepare for a period of uncertainty. With this in mind, landlords may consider remortgaging their existing properties on to a fixed rate product. Buy-to-let rates are very competitive at the moment and this could be a good time for landlords to fix their mortgage payments so that they know what their monthly outgoings will be. There is a wide selection of buy-to-let remortgage products available, some of which include incentives such as a free valuation or free legal fees.

    Interestingly, PTM has also had an increased number of enquiries from joint applicants recently. With the new buy-to-let tax changes coming into play in 2017, landlords will be looking to off-set their increased levy payments. In some circumstances, it may be beneficial for landlords to own their properties jointly with a spouse. Profits derived from the property would be split between both applicants and if the spouse is in a lower tax bracket, this could reduce the overall tax bill. It is important that landlords always seek professional advice regarding their individual tax affairs to assess the best way to deal with their buy-to-let investments.

    Tel: 029 2069 5480

    Email: info@propertytribesmortgages.co.uk

    Web: http://www.propertytribesmortgages.co.uk 

    (*Community note: For the avoidance of confusion, Property Tribes Mortgages is our "self service" option for landlords who know what finance they require. Property Tribes Financial Services is our "fully advised" service for bespoke solutions and financing.  By using either of these services, the small commission PT receives helps maintain this site as a free-to-use community resource.  By patronising our services, it is an easy way for you to show your support of this community.*).

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