Buy to let mortgages for contractors made easy
Whether you’re a seasoned investor, or exploring your options as a landlord for the first-time, you may already be aware of the raft of reforms in this sector last year?
Landlords will soon need to register with a redress scheme to solve tenancy disputes, although it’s not been announced yet whether this will be a new body or an extension to the remit of an existing body.
Any property to be leased after April 2018 must also have a minimum energy efficiency rating of E. (Pre-existing tenancies have until 2020 to comply.) Providing false information on this could lead to a fine of up to £5,000, so if you’re looking now, ensure you understand the energy rating of the property you want to buy.
There are also proposals to introduce inspections on rented premises every three years, and while this is not yet confirmed, it will pay to bear this in mind when looking at the overall condition of any property you’re considering.
Requirements also vary across the country, but many local authorities require you to register as a landlord. Around 300 either already have some form of scheme in place, or are consulting on its introduction. Check your local council’s website to see if this affects you.
Then there’s tax: as a landlord, you can offset 50% of your mortgage interest for tax relief in the tax year starting on 5 April 2018, but this allowance will disappear completely by 2020, so it now pays to do your sums carefully.
Lenders are also imposing their own tougher restrictions on portfolio landlords. If you are adding a fourth property (or above) to your portfolio, then when applying for new finance you will now need to show full financial information for each existing property. If your existing portfolio is heavily mortgaged, this could result in you getting turned down for new loans.
If you’re still keen, the other thing to bear in mind is that any loan for Buy to Let is assessed on your self-employed profit (that’s after deduction of expenses), which is also secondary to the potential rental income from the property.
As we saw in 2017, taxation rules are always changing, so we recommend you always seek specialist tax advice before completing any purchase. But if you want to explore your options further, contact one of our specialist mortgage advisors today.
Some buy to let mortgages are not regulated by the Financial Conduct Authority