Mortgage interest relief changes for Landlords Budget 2015

Up until April 2017, landlords, whether individuals or corporate, can offset the amount of interest which they pay to their lenders annually on their mortgage against their tax bill.  Capital repayments do not qualify. Landlords are entitled to treat interest paid as an expense of their lettings business in the same way as any other business

Mortgage interest relief for landlords will be reduced in a ‘proportionate and gradual’ way, to bring the benefits for Buy to Let landlords in line with ‘Buy to Live’ buyers. This is George Osbornes way of market manipulation to hinder Higher Rate Tax Payers in favour of First Time Buyers – hindering competition instead of building more homes.

The system will be remain, but the tax relief will be restricted to the basic rate. The higher rate relief will start to be withdrawn over four years, starting in April 2017.

HMRC: Interest releif changes costs for individual landlords; suggests only One in Five landlords will be effected but the RLA in a “rent will rise” article outline that those 20% of landlords effected are often those that house the most families (i.e. more properties).

You can read the Chancellors Budget Speech, read the Budget Key announcements or read the Full Summer Budget 2015.

“Mortgage interest payments can be offset against income for buy-to-let landlords, an unfair advantage over people buying homes to live in, he says. This has fuelled buy-to-let mortgages, which are now 15% of the market. Mortgage interest relief will be restricted to the basic rate of interest” said George Osborne MP.

Landlord’s are not impressed from UK Property Traders to Property Tribes. Higher Rate Tax payers angry at a sever increase in costs, Lower Rate Tax payers worried about the president it sets and Conservatives questioning the Chancellors housing market manipulation.

The discussion has moved on to tax mitigation (not evasion) from LTD Companies to Trusts; an unintended consequence of Summer Budget 2015 having landlords head to there accountants for Tax Planning and asking about Limited Company Mortgages.

This oncoming change was predicted by the Residential Landlord Association (RLA) Policy Director Richard Jones whom wrote a report titled WHY MORTGAGE INTEREST TAX RELIEF IS VITAL TO THE PRIVATE RENTED SECTOR.. In the article it outlines “any other business rightly qualified for tax relief on interest on borrowed monies” and acquiring property to rent out is extremely capital intensive.  Most landlords are small businesses, many of which have to borrow to fund the purchase of properties.

Above all it would be tenants who would be affected.  The impact on tenants would be disastrous due to reduced investment in the Sector and higher rents to offset landlord’s extra costs. Like any other business it is ultimately the consumer of that business who bears the burden of tax because business taxes are passed on to consumers; in this case the tenants.

In a time of austerity where George Osborne needs to raise funds the higher rate tax payer landlords will take a hit and George Osborne gets to suggest he is helping first time buyers. To change mortgage tax interest relief would completely fly in the face of government policy and sends out the wrong signals of the wishes of the government to entice significant institutional investment.

In summery: The government will restrict the relief on finance costs that individual landlords of residential property can get to the basic rate of tax. The restriction will be phased in over 4 years, starting from April 2017. This change only effects higher rate tax payers of which HMRC estimates is 20% of all landlords.

Posted in Buy to Let News

7 Tips for Self Employed Mortgage

Mortgage Lenders usually class you as self-employed if you own more than 20-25% of the shares of a business.

    1. Keep your accounts in Good Shape.
      The mortgage broker can ask from one years accounts, mainstream lenders for three years but those accounts must be clear and accurate.

      Creative Accounting may lower your tax; but you must show a strong company that pays you well for the mortgage you want to purchase. Ideally, you want your company turnover and profits to be consistent or increasing – obviously easier said than done!

      This is more prominent in Residential than Buy to Let; ensure your personal income is strong enough to support the loan amount; retaining profits in the company may lower personal tax liabilities but can reduce the maximum loan a lender can offer you; especially after MMR – paying a fair dividend against the profit made each year should help.

      Keep your accounts up to date – your most recent accounts cannot be more than 18 months old for mortgage purposes.

    2. Use a certified and chartered accountant
      Lenders do not accept DIY Accounts or those submitted by a bookeeper. You need to make sure your accountant is certified or chartered for a mortgage lender to accept these as proof of income. Even if you record the accounts yourself; it is worth visiting an accountant to certify and submit them to Companies House.
    3. Have your SA302 forms an Tax overview prepared
      HMRC can take a few weeks to provide SA302 forms – get hold of the forms in advance of applying for the mortgage. Have the documents ready (or at least requested) from day one.

      All borrowers have to prove their income whether they are employed or self employed and so the difficulty for self employed borrowers is in how they evidence that income. If you are not an employee with a regular paycheck it is going to be more difficult; the SA302 is that “simple document” that lenders like to rely on from a government body – HMRC!

    4. Make sure your Credit Report is Healthy as Possible
      All lenders take into account your credit report before they offer you a mortgage.

      There are many steps you can take to improve your credit record: registering to vote, getting credit card and paying off the balance every month (even if you don’t need it).

    5. Save up as large a deposit as possible
      Self-employed are seen as a higher risk – on a residential basis its almost impossible to obtain a 95% loan to value from self-employed. The lenders want you to put more funds at risk in the event of a default.
    6. Be Realistic
      Do not overstretch yourself and attempt to take out a bigger mortgage than you can afford; self-employed people have variable income fluctuating.
    7. Use a Mortgage Broker
      High street mortgage lenders have little, if any interest in lending to the self-employed. Specialist providers are more in tune with the self-employed, understand how they operate and look at each case on its own merits – specialist lenders almost exclusively operate through mortgage advisers (as well as the high street ones).

 

Posted in Buy to Let FAQ

RightMove launches “Landlord Inteligence”

rightmove-landlord-intel

RightMove has launched a new “information” service called Landlord Intelligence with fancy Spy Themed video that shows an ere Google Streemap panorama of what you put in. After this showing off of technologies from Google Streetview and RightMove we get some RightMove data.

You can get the Average Rent Per Month for a postocde; the number of properties on the market and total number of local searches. A-Lot-Less information than that is available at Zoopla; especially if your a Zoopla Pro user.

This data does give you an idea of demand with “total searches” an indication of Tenant Demand and “properties on market” giving you an idea of how much competition you have. Not pieces of data to be ignored when looking to purchase a property in that area.

RightMove was giving away a free ebook but the message reads “Apologies, the book offer is now closed”.

Landlords looking for area Market Research as still better provided for by Zoopla.

 

Posted in Buy to Let News

Metro Bank – Now Avaliable at Bespoke Finance

We are delighted to inform going into 2015 Bespoke Finance is opening up Metro Bank mortgage offering to be available in all of England and Wales; Metro has opened their doors and no longer limited to London.

metro-bank-avaliable

Metro Bank is Britains first new High Street Bank in over 100 years, its definitely different for instance mortgage applications are down to Manual Underwriting and not a formula on a computer.

Metro Bank Buy to Let Rates

  • 4.09% Fixed for Five Years up to 75%
  • 3.79% Fixed for Five years up to 65%
  • 3.19% Fixed for Two Years up to 75%
  • 2.99% Fixed for Two Years up to 65%

Metro Bank Residential Rates

  • 3.69% Fixed for Five years up to 85% LTV
  • 2.99% Fixed for Five years up to 70% LTV
  • 2.84% Fixed for Five years up to 60% LTV
  • 2.04% Fixed for Two years up to 70% LTV

Metro Bank Specialities

We’ve already mentioned the Manual Underwriting, this gives any solid case a chance rather than a yes/no criteria throwing out cases.

One interesting aspect is Metro will do Joint Borrower with a sole proprietor lending. Allowing those suffering an issue with income to find a partner to mitigate the lenders risk but the applicant still remains the “owner”.

The Southern Metro Bank customers have enjoyed up till now Free Valuation and Free Legals on re-mortgages on both Residential and Buy to Let. Metro Bank is looking to keep this Re-mortgage Package for all of England and Wales – this kind of offer brings “product switch” into question with your current banker – Metro could offer better rates.

As for overpayments Metro allows 20% Residential and 10% Buy to Let – Overpayments of the Total Borrowed each year.

The New Bank also allows Interest Only up to 70% LTV, whilst other lenders now only allow Repayment on Residential Mortgages. As long as you are able to provide that bank with a credible and provable repayment strategy in place from the outset.

Posted in Buy to Let News, Residential Mortgage News

2014 Stamp Duty Changes

Before 4 December 2014, SDLT was charged as a single percentage of the property price.

After 4 December 2014, SDLT is charged at different rates depending on the portion of the purchase price that falls into each rate band.

This is viewed as more “fare” whilst someone purchasing a property at £126k was charged a rate on the full price; previously someone paying £125k was not. This new system would mean the person paying £126k – is only charged a rate on £1k. It has now been changed to proportions.

Chancellor George Osborne - Tax Changes

With these changes – do come modifications of the Property Brands some increases – so it is hard to put a finger on the winners and loosers. Overall the government expects the SDLT reforms to cost the Treasury a total of £4.4bn in the next six years.

These changes come after the Conservative Chancellor George Osborne announced that he would be completely reforming what he described as a “badly designed tax on aspiration”.

New Property Value Bands

£0 – £125,000 – 0%
£125,001 – £250,000 – 2%
£250,001 – £925,000 – 5%
£925,001 – £1.5 million – 10%
Over £1.5 million – 12%

Side by Side Comparison of Changes:

Stamp Duty Changes Comparison

What is SDLT or Stamp Duty?

Stamp duty land tax, to give it its full name, is a tax you pay when you buy a home. You have to pay if you buy a property in the UK over a certain price. It doesn’t matter if it is somewhere you hope to live or a buy-to-let property. This is charged on all purchases of houses, flats and other land and buildings.

Is this good news for me?

Everyone buying a house costing less than £937,000, says the Treasury, or about 98% of households – this means savings. Anyone spending more will face a higher bill. If you are spending £2.1m on a home you will pay £165,750 under the new regime versus £147,000 previously.

Posted in Buy to Let News, Residential Mortgage News

House Price rise by just 0.3% in November

You can read Nationwide full report HERE.

The annual pace of house price growth continued to soften in November, falling from 9.0% in October to 8.5%, marking the  third  consecutive month where annual growth has moderated. This is despite house prices increasing by 0.3% month on month in November.

There is something of a disconnect between the slowdown in the housing market  n recent months  and broader  economic indicators, which have remained relatively upbeat.

Historically low mortgage rateshave helped to mitigate against the fact that house priceshave been outstripping income growth.

Posted in Buy to Let News, Residential Mortgage News

Fleet Mortgages releases new Product Range

Fleet Mortgages a new mortgage lender is about to launch offering HMO Products, Limited Company Products and Vanilla Buy to Let.

The launch of the range is expected to be in early December with products already sent to distributors.

Completion fee levels on the products range from 1% on all individual buy-to-lets, 1.5% on limited company and 2% on HMOs.

The Chief executive of Fleet Mortgages, said: “It is with great pleasure that we can officially announce this first Fleet Mortgages’ buy-to-let product range which is specifically for the intermediary market and has been designed in collaboration with many adviser stakeholders.

“Our aim has been to deliver a competitive product range which focuses on the needs of the experienced landlord. Plus we have not only developed products for individuals but have also sought to offer a range which caters for, what we think, is an underserved section of borrowers – namely limited companies and HMOs.”

Vanilla Buy to Let

2.79% 2 Year Fixed Rate at 65% LTV
3.29% 2 Year Fixed Rate at 75% LTV
4.29% 5 Year Fixed Rate at 75% LTV
4.79% 2 Year Fixed Rate at 80% LTV

LTD Company Buy to Let

4.39% 2 Year Fixed Rate at 65% LTV
4.59% 2 Year Fixed Rate at 75% LTV
5.29% 2 Year Fixed Rate at 80% LTV

HMO Buy to let Products
5.29% 2 Year Fixed Rate at 65% LTV
5.39% 5 Year Fixed Rate at 75% LTV
5.99% 5 Year Fixed Rate at 75% LTV

Criteria

Rental income over 125% at the intial rate.
Minimum loan of £25k and Maximum of £750k
Income of at least £25k
Minimum 5 Year Term

Source: Fleet Mortgages and Mortgage Solutions

Posted in Buy to Let News
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