The Buy-to-Let Landlord has faced a deluge of new rules, regulations and tax changes over the last few years.
The Buy-to-Let sector possibly became the victim of its own success, with both the government and regulatory bodies now applying more control. It’s viewed as a decent revenue source bu the government. Meanwhile, the Bank of England sees the sector as more likely to be cyclical in nature, which it feels could impact upon a measured recovery in the economy.
Struggles for potential First-TIme buyers
Whilst 81% of those that want to buy their own property feel that money on rent is a waste, the same research shows that 40% of prospective first-time buyers view raising a deposit as the number one obstacle, and one in four were refused a mortgage when applying via their main bank.* So this will help to fuel levels of demand for renting, as will any diminishing supply, should the expected 380,000 landlords (19% of the market) offload property in the next 12 months. **
(Source: *Aldermore, June 2018, **National Landlords Association, May 2018)
Changing nature of the marketplace
Over recent times the marketplace has also become polarised. One one side we see that around one in five landlords are ‘accidental’ ones, where they’ve entered the private rental sector without really planning to through marriage, inheritance and other events.
(Source: Foundation Home Loans, June 2018)
At the other extreme, we have the professional landlords, who may have a number of properties to manage.
Key regulatory and tax developments
In this respect there are numerous initiatives to get to grips with, such as the stamp duty increase, and stepped reduction in tax relief. Then, stricter regulatory rules were introduced, requiring lenders to stress-test likely future interest rates over a five-year period (unless the loan rate is fixed or capped for five years or more). This was followed by new special underwriting rules for those ‘portfolio’ landlords that have four, or more, managed properties.
How we can help…
For our part, we operate in the mortgage lending environment, day-in, day-out, so we would know where to identify suitable deals, and then how to assist you in pulling together the increasing amount of paperwork that’s required these days (particularly for portfolio landlords) to meet the needs of the lenders and industry regulators. So please do get in touch.
There is no guarantee that it will be possible to arrange continuous letting of the property, nor that the rental income will be sufficient to meet the costs of the mortgage.
The value of your Buy-to-Let property and income from it can go down as well as up. You may also require advice on the legal and tax issues.
The Financial Conduct Authority does not regulate legal and taxation advice, and most Buy-to-Let mortgages.
HM Revenue & Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
Your property may be repossessed if you do not keep up repayments on your mortgage.
Limited Company Status
- Placing properties within a limited company means that they shouldn’t be affected by the tax relief changes, and lenders may apply a less stringent rental calculation as a result.
- This is a route a number of landlords have opted for, but it won’t be right for everyone, particularly those with just one or two properties. For this reason, it’s vital that you obtain tax advice from your accountant.
- However, the lenders have recognised the demand and increasing number of products are becoming available to provide for this need.