Mortgage lenders have been criticised for charging extra on limited company buy-to-let products by Foundation Home Loans (FHL), a specialist buy-to-let mortgage provider.
Landlords Shouldn’t Pay Extra for Limited Company Mortgages
In December, the firm announced that its own limited company buy-to-let mortgage would be priced at the same rate as its ordinary range.
The Commercial Director of FHL, Simon Bayley, believes that landlords should not be expected to pay extra due to a lack of choice, at a time when they face huge changes to their finances.
From April, mortgage interest tax relief for buy-to-let investors will be cut, along with a reduction in the Wear and Tear Allowance. However, those operating as limited companies will not be subject to the tax relief changes, leading to many landlords changing the way they run their lettings businesses.
Additionally, landlords and second homebuyers will be charged an extra 3% in Stamp Duty on property purchases.
Bayley expresses his concerns: “Certain lenders are charging up to 100bps extra for this product over their core range, when the risk is no different – effectively, asking landlords to pay any tax saving from using a limited liability company structure to the lender instead.
“Fortunately, the intermediary community is far too canny to go on selecting lenders who decide on this kind of pricing model. As soon as they realise that there are lenders, like FHL, who are not in the market to take short-term advantage of landlords keen to minimise their tax exposure, then I am sure that market forces will dictate that this kind of overpricing will quickly disappear. It certainly will not win any friends among advisers and their landlord clients in the long term.”1
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1 http://www.financialreporter.co.uk/mortgages/industry-to-combat-limited-company-btl-charges.html