Posts with tag: buy to let mortgages

Landlords Rushing to Avoid Buy-to-Let Tax Changes

Published On: February 3, 2016 at 9:29 am

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New research suggests that landlords are rushing to invest in the sector ahead of key buy-to-let tax changes.

As the 1st April Stamp Duty surcharge deadline approaches, many property investors are seeking to avoid the hike.

Landlords Rushing to Avoid Buy-to-Let Tax Changes

Landlords Rushing to Avoid Buy-to-Let Tax Changes

Meanwhile, more individual investors seem to have turned their lettings businesses into limited companies in order to be exempt from Chancellor George Osborne’s clampdown on the buy-to-let sector.

Limited companies accounted for 43% of all buy-to-let deals in January, up from 38% in December, according to specialist broker Mortgages for Business.

The total number of buy-to-let mortgage applications – by both individual investors and limited companies – increased by 27% in January from the previous month.

From 1st April, buy-to-let landlords and second homebuyers will be subject to a 3% Stamp Duty surcharge when they purchase a property worth over £40,000.

The Managing Director of Mortgages for Business, David Whittaker, explains how this is changing the market: “The increase is due to landlords trying to get as many purchases as they can completed before the Stamp Duty surcharge comes into effect on 1st April, after which I would expect transactions to return to more considered levels.”

Additionally, landlords face the forthcoming change to buy-to-let mortgage interest tax relief, which will be cut to the basic rate. However, limited companies operating lettings businesses are exempt from this change.

Whittaker comments: “Landlords have woken up to the fact that transacting via a corporate vehicle is a feasible option, and in many cases, the most prudent route going forward.

“I wouldn’t be surprised if the percentage continues to rise as landlords, especially those paying the higher tax rate, prepare for the forthcoming changes to relief on finance costs.”1

Have the planned changes affected the way you are investing in the buy-to-let sector?

1 http://www.mortgageintroducer.com/ltd-buy-to-let-takes-43-share-in-january/#.VrHGmFtLH8s

Landlords Shouldn’t Pay Extra for Limited Company Mortgages

Published On: January 19, 2016 at 9:18 am

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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

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 

How will the tax changes affect your business?

Remember to check back to LandlordNews.co.uk for the latest landlord updates and advice.

1 http://www.financialreporter.co.uk/mortgages/industry-to-combat-limited-company-btl-charges.html

Buy-to-Let Purchases to Outstrip Remortgages as Landlords Rush to Invest

Published On: January 15, 2016 at 12:04 pm

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Over 2015, buy-to-let remortgage transactions surpassed purchase loans by more than 2:1, according to the latest Complex Buy to Let Index from specialist broker Mortgages for Business.

It found that in the fourth quarter (Q4), remortgages for vanilla buy-to-let properties accounted for 64% of all transactions. Remortgages for Houses in Multiple Occupation (HMOs) and Multi-Unit Freehold Blocks (MUFBs) experienced even greater activity, at 78% and 88% respectively.

Buy-to-Let Purchases to Outstrip Remortgages as Landlords Rush to Invest

Buy-to-Let Purchases to Outstrip Remortgages as Landlords Rush to Invest

Managing Director of Mortgages for Business, David Whittaker, explains: “The results aren’t surprising; for some time now, landlords have been making considerable savings through remortgaging. Many have also been releasing equity to make improvements and plan further purchases.”

Although, he does expect this to change: “I anticipate that we will see a reversal of this trend in the first quarter of this year, as landlords hurry to expand their portfolios before the Stamp Duty surcharge kicks in on 1st April.”

And Paul Mahoney, the Managing Director at Nova Financial, agrees. He says: “The 3% Stamp Duty premium for buy-to-let properties and second homes has put somewhat of a deadline on those seeking or considering a property investment. That has and will continue to cause a spike in activity in the lead up to April.

“The change makes completing on an investment prior to the 1st April more attractive and we have found this is spurring those considering an investment into action. We expect the market to return to normality following April and continue the strong performance experienced in 2015.”

Whittaker has also already seen a change in the market: “The number of enquiries for purchase finance is already well ahead of where we were this time last year, particularly from those looking to sell their personally owned property into a corporate vehicle.”

From 1st April, buy-to-let investors and second home buyers will be charged an extra 3% in Stamp Duty on properties worth over £40,000. Those purchasing 15 or more properties in one transaction will be exempt from the charge.

Mortgages for Business’s data shows that yields across all property types recovered in Q4 2015, but in real terms they continue to remain static, as rental income fails to keep up with house price growth. However, returns for more complex investments remain strong.

The amount of lenders offering buy-to-let mortgages has remained at 33, although the number of buy-to-let mortgage products available has increased slightly to an average of 975 over the quarter.

Whittaker comments: “It is unlikely that this average figure will be topped going forward unless new lenders enter the market, or some of the existing providers start to offer products to limited companies.

“Of course, that figure is only an average – at one point at the beginning of December our tracking system, Mortgage Flow, showed 1,168 products.”1

How have/will the changes affect your investment activity?

1 http://www.mortgagesforbusiness.co.uk/news-insight/2016/january/btl-purchases-could-outstrip-remortgages-in-q1-2016/

 

Conservative Peer Attacks Buy-to-Let Tax Changes

Published On: January 6, 2016 at 12:46 pm

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Howard Flight, a Conservative peer, has attacked his own party’s changes to the buy-to-let sector.

Conservative Peer Attacks Buy-to-Let Tax Changes

Conservative Peer Attacks Buy-to-Let Tax Changes

Lord Flight, a former Conservative shadow chief secretary to the Treasury, has voiced his concerns over the forthcoming reforms to landlord taxes.

“I hope the Government will re-think its sudden attack on buy-to-let this summer and autumn,” he begins. “Otherwise, it risks the very crisis in the buy-to-let housing and lending markets of which the Governor of the Bank of England has recently warned.”

Flight warns that buy-to-let tax changes could cause a sharp decline in property prices, “if not a crash”.

He explains: “The only buy-to-let ‘tax advantage’ has been the ability for the interest cost [on buy-to-let mortgages] to be offset against an individual’s income to determine their tax bills – the very thing which the Finance Act measure has hit by limiting the tax deductibility of mortgage interest to a 20% tax rate.

“This will hit more modest buy-to-let investors the most, while many of the more sophisticated have their buy-to-let properties held via a company.”

Under the Finance Act 2015, buy-to-let mortgage interest tax relief will be cut, but landlords operating through a company will not be hit.

Additionally, from April, buy-to-let investors and second home buyers will be charged an extra 3% in Stamp Duty on properties worth over £40,000.

Flight warns that these two tax changes together could “put thousands of tenants’ security at risk”, as landlords rush to evict tenants and sell their properties.

He explains the significance: “Buy-to-let has provided some three million homes for those not able yet to afford to buy their homes – especially in London.”

The article, published on the Conservative Home website, arrives just days after a major accountancy firm, KPMG, warned that these tax changes could push rent prices up.

It believes that developers could struggle to sell new build property due to high Stamp Duty costs for investors, causing the supply of rental homes to drop and therefore driving rent rises.

Read Lord Flight’s full article here: http://www.conservativehome.com/thecolumnists/2016/01/howard-flight-the-government-is-wrong-to-attack-buy-to-let.html

New Range of Buy-to-Let Mortgages from Leeds Building Society

Published On: December 27, 2015 at 10:44 am

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New Range of Buy-to-Let Mortgages from Leeds Building Society

New Range of Buy-to-Let Mortgages from Leeds Building Society

Leeds Building Society has launched a new range of mortgages with cashback for existing buy-to-let borrowers.

Existing buy-to-let landlords hoping to add to their property portfolio or remortgage investments they already own can choose from an exclusive range of competitive products, each with £250 cashback.

They include: a two-year discount buy-to-let mortgage at 2.10%; a two-year fixed rate deal at 2.60%; and a five-year fixed rate product at 3.39%.

All of these deals are available at up to 60% loan-to-value (LTV) and come with a free valuation for properties worth up to £500,000 and fees-assisted legal services. They also have a low fee of £199.

Buy-to-let deals up to 70% LTV are also available through the lender.

Director of Business Development at Leeds Building Society, Martin Richardson, comments: “Adding the cashback benefit for existing buy-to-let borrowers complements some of the other changes we have made to criteria on this type of lending.

“We keep our lending criteria under active review and listen carefully to feedback from borrowers and intermediaries to find ways we can improve our service and develop products which better suit customer need.”1

The building society made changes to criteria on its buy-to-let mortgages earlier this year, including increasing the maximum number of properties an investor can hold to eight.

Currently, Leeds requires a minimum income of £25,000 for borrowers, but this has been altered slightly to allow joint income earners with less than £25,000 annual income to apply, so long as their joint income is over £40,000.

It requires rental income to cover at least 125% of interest payable on the buy-to-let variable rate.

1 http://www.propertyreporter.co.uk/finance/leeds-announces-btl-range-changes.html

Buy-to-Let Tax Relief to Still Exceed £15bn Under New Rules

Published On: December 21, 2015 at 4:06 pm

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Buy-to-Let Tax Relief to Still Exceed £15bn Under New Rules

Buy-to-Let Tax Relief to Still Exceed £15bn Under New Rules

UK landlords are expected to claim £15 billion in buy-to-let property expenses, even under forthcoming Government changes to mortgage interest tax relief, according to new research from Ludlow Thompson estate agents.

When changes to tax relief are enforced in 2018-19, landlords will still be able to claim around £6.3 billion on interest payments made on loans used to purchase buy-to-let property, despite the reduction.

In the summer Budget, Chancellor George Osborne revealed that the Treasury expects total revenue to rise to £1 billion by 2020-21 after cutting the tax relief available to buy-to-let landlords.

Additionally, from April, the Government is changing the Wear and Tear Allowance so that investors will only be reimbursed for money actually spent on replacing furnishings and white goods, instead of being an automatic 10%.

Ludlow Thompson found that in the past year, tax relief on buy-to-let mortgage interest payments was the highest amount claimed, at £6.6 billion.

Chairman of Ludlow Thompson, Stephen Ludlow, says: “Even with the slight Government reductions to tax reliefs, buy-to-let still offers some of the most attractive tax breaks of all investments.

“There are still large incentives for potential investors, including significant tax reliefs for costs such as general maintenance as well as legal and professional fees.

“Averaged over the lifetime of a buy-to-let investment, recent tax relief and SDLT [Stamp Duty Land Tax] changes will have a very negligible impact on total returns to investors.”1

From April, buy-to-let investors and second home buyers will be charged an extra 3% in Stamp Duty on purchases over £40,000.

Do you think these changes will greatly affect your lettings business?

1 http://www.propertyreporter.co.uk/landlords/btl-tax-reliefs-to-exceed-ã¢15bn.html