Keep calm and carry on

In last years’ article, I started with the statement “well what a year it has been for the buy-to-let market” a year that I thought was filled with unprecedented change but also that we shouldn’t lose sight of the continued growth in the buy-to-let market which reflected a true recovery from the époque of crisis. Fast forward yet another 12 months and the whirlwind speed of 2016 feels like a complete understatement in reference to the year on which we were about to embark.

Council of Mortgage Lenders figures show that the market has grown from 840,000 buy-to-let mortgages outstanding with a total balance of £93.2bn at the end of 2006, to 1.8m buy-to-let mortgages with an aggregate balance of £214bn by the end of 2015.

The first of a number of government moves considered as an attempt to curb enthusiasm for the buy-to-let market descended onto the market on April 1 this year, when properties bought as second homes or buy-to-let incurred an extra 3% Stamp Duty Land Tax. This extra cost – although unwelcome – was in many ways the calm before the storm.

We are starting to see things settle in the aftermath of the changes which caused a stampede in the first quarter of this year, but there’s no doubt that it has impacted purchases as mortgage lenders are now seeing the market move to a 70/30 split in favour of remortgages.

The next hurdle came by way of the Mortgage Credit Directive. I remember discussing it with many lenders in the advent of its introduction given the implications of time, effort and investment necessary to help implement the new rules.

It caused a lot of debate, especially around how lenders – after spending time and resource to accommodate the new regulation – then had to be able to interpret the new landscape. Despite these challenges for the industry, loans in the the new category of Consumer Buy to Let (formerly Let to Buy and Inherited Properties) are now being written by the majority of the key lenders.

As a result, aligning their systems to the evolving shape of the market has afforded them for innovation.

Next, we flashback to last year’s Budget, when we first heard of government plans to change the way in which tax relief on finance costs will be treated for landlords on a sliding scale from April 2017. There has been much debate in the build-up as some lenders have taken time to consider options while others have moved to increase their Interest Coverage Ratio (ICR) from the standard 125% to 140% and above to cater for the increased tax liability impacting higher and top tier tax payers.

One of the larger lenders has recently announced it will take a different approach to help borrowers be best placed for the impending changes. BM Solutions – part of Lloyds Banking Group – has recently explained its plans, which are calculator-based and designed to reflect an individual’s tax position rather than apply a one-size-fits-all solution. I anticipate this will be very well-received by intermediaries and landlords alike, and particularly by basic rate tax payers who may otherwise be forced into a much higher ICR.

It will be well into 2017 before we can gauge a true impression of the impact, but potential and existing landlords who fall into the higher tax bands should definitely be having conversations about specialist tax advice would definitely be recommended for both new and existing landlords.

Last year, concern by the Financial Policy Committee (FPC) that the growing buy-to-let market could potentially destabilise the housing market has now led to new FPC powers of direction granted over
buy-to-let lending. As a result we have spent 2016 watching intently for further moves to ‘control’
buy-to-let lending activity.

Then came autumn’s Prudential Regulation Authority (PRA) consultation from left field which has sent further mandatory change rippling through the market as lenders forced to adapt again – particularly in terms of the stress rates applied to buy-to-let lending moving to 5.5%. The ability to use a different stress rate for five-year fixed may be a positive step for the market, yet it would be unwise to think the regulator is not watching closely in the wings.

We can expect the New Year to signal a new shape for the market with the impact of the changes being monitored by all. Adapting to these new regulations and processes, including longer term underwriting standards – another change in 2017 affecting landlords with four or more properties – is going to prove another challenge for lenders. I do have it on good authority that some lenders are already working on this, so I’m hopeful that there we will see some positive solutions.

Landlords are expecting this raft changes to impact profitability, but those largely impacted may look to mitigate this by restructuring their portfolios such as transferring ownership to limited companies. This is not appropriate for everyone, and again seeking independent tax advice is fundamental for landlords to get the best outcome.

Despite what has seemed like a steeplechase of change over the past 12 months, the market remains resilient and continues to play a key role in addressing the UK’s housing shortage. According to a recent BM Solutions survey in conjunction with BDRC Continental, landlord confidence has bounced back strongly and is almost back to pre-2015 Budget levels.

Landlords remain confident about the future prospects of their own letting business with many increasing rents as tenant demand overall remains healthy. This confidence is buoyed by rental income and profitability remaining strong, with a quarter of landlords now looking to increase their portfolios amid the current low interest rates.

The Private Rental Sector will continue to provide valuable options and flexibility within the housing market, and we have to hope that we’ll be given a curve ball holiday.

The market indeed needs us all to remain committed, calm and confident, and quality of advice will remain a key strength and differentiator for advisers, backed by robust products and the support of providers to ensure everyone on board is best placed to navigate the new landscape ahead.


Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact RLA Mortgages.

This is a financial promotion and in no way should it be viewed as a personal recommendation or advice. Before a recommendation/advice can be given you should seek independant mortgage or financial advice.
RLA Mortgages is operated exclusively for the RLA by 3mc, which is authorised and regulated by the Financial Conduct Authority. FCA No. 302992. ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Although the FCA regulate the way the majority of mortgages are sold, in most cases they do not regulate buy to let mortgages. This means you may have less protection if things go wrong with a buy-to-let mortgage. All calls are recorded for training and monitoring purposes.

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Are you within 6 months of the end of your current BTL product?

New Buy to Let underwriting rules have been introduced since the 1st January 2017 with further underwriting rules for portfolio landlords taking effect from the 30th September 2017.

The rules may impact on the amount you could raise on a Buy to Let property, both for purchases and remortgages. With over 60% of Buy to Let lending in the UK being for remortgages, it is important that you assess all options available prior to the end of your current product period.

RLA Mortgages provides a free service to RLA members whereby they will assess your current product, the options available from your current lender and then compare the product offered by the lender against the whole of market, providing you with research results and a recommendation that best suits your needs.

For further information, contact RLA Mortgages

E: info@rlamortgages.co.uk
T: 0844 858 4420


Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact RLA Mortgages.

This is a financial promotion and in no way should it be viewed as a personal recommendation or advice. Before a recommendation/advice can be given you should seek independant mortgage or financial advice.
RLA Mortgages is operated exclusively for the RLA by 3mc, which is authorised and regulated by the Financial Conduct Authority. FCA No. 302992. ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Although the FCA regulate the way the majority of mortgages are sold, in most cases they do not regulate buy to let mortgages. This means you may have less protection if things go wrong with a buy-to-let mortgage. All calls are recorded for training and monitoring purposes.

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BTL 5 Year Fixed – 2.99% fixed with free valuation & free remortgage legal service

If you’re looking for buy-to-let finance with fixed payments, we have a product available for both remortgages and purchases with the added benefit of no early repayment charges from day one.

The mortgage has the following features:

• Available for the purchase and remortgage of rental property
• 2.99% Fixed until 31/07/22 (4.21% APRC) reverts to lenders variable rate currently 4.49%
• No early repayment charges from day one
• Free standard valuation to a value of £700
• Free remortgage transfer service
• £1,999 lender arrangement fee (can be added to the loan) & £295 broker fee for RLA members (normally £495)
Interested? Contact RLA Mortgages today:

E: info@rlamortgages.co.uk
T: 0844 858 4420


Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact RLA Mortgages.

This is a financial promotion and in no way should it be viewed as a personal recommendation or advice. Before a recommendation/advice can be given you should seek independant mortgage or financial advice.
RLA Mortgages is operated exclusively for the RLA by 3mc, which is authorised and regulated by the Financial Conduct Authority. FCA No. 302992. ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Although the FCA regulate the way the majority of mortgages are sold, in most cases they do not regulate buy to let mortgages. This means you may have less protection if things go wrong with a buy-to-let mortgage. All calls are recorded for training and monitoring purposes.

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Limited company buy-to-lets enable landlords to leverage assets

Earlier this year, I wrote an article in the RPI magazine in which I highlighted the increasing interest in limited company buy-to-lets. In it, I pointed out that the tax changes being introduced by a chancellor who was clearly set on making life more difficult for landlords, were encouraging more investors to consider buying property via limited companies.

The good news, I’m delighted to report, is that specialist buy-to-let lenders are increasing their support for the limited company BTL market, with key indicators showing that limited company buy-to-let mortgage rates have been falling.

What’s more, whereas the rental calculation used by many mainstream residential buy-to-let lenders has moved up to typically 140-145% at a notional rate of 5.5% as a result of the pending Prudential Regulation Authority (PRA) changes, the rental calculations on limited companies haven’t moved. Limited company rental calculations are still typically 125% @ 5%, which makes them advantageous for investors wanting to leverage their assets, as they will be able to borrow more via a limited company. For longer term fixed rates, typically 5 years we are also seeing rental calculations based on a 125% @ the pay rate for the product.

I also mentioned in my article that lenders such as Paragon, Foundation Home Loans, Aldermore and Shawbrook were no longer applying a pricing premium on limited company buy-to-let mortgages. Well, more good news, because other lenders are following suit with Kent Reliance, Precise Mortgages, Interbay and Axis Bank all now taking a similar approach and it’s my expectation that this trend will continue in the future.

The combined effect of cheaper pricing and more advantageous rental calculations are making limited company buy-to-lets a stronger proposition for those landlords who are looking for ways to mitigate the more onerous tax regime.

The tax changes that are being phased in with effect from April 2017 and which will be fully in force by the beginning of the 2020/21 tax year, mean that individual landlords will only be able to claim back relief at the basic rate of 20% rather than the higher tax rates of 40% or 45%. Although this change won’t affect lower rate taxpayers, it may well mean that some higher rate taxpayers find that hitherto profitable businesses suddenly start to return a loss.

One potential solution to this problem is for higher rate tax taxpayers to hold their property portfolios within a limited company, thereby taking them out of the personal tax regime altogether and become subject to corporation tax instead. Until recently, limited company buy-to-lets were considered a specialist niche within the already niche buy-to-let market. But that is now slowly starting to change, as more landlords are considering limited company structures as a more appropriate way forward.

I also mentioned in my article that it would make good sense for mortgage brokers to supply their buy-to-let clients with two sets of quotes: one for an individual buy-to-let and one for a limited company buy-to-let, so that clients, with advice from their accountants and tax advisers, could determine the best option. I believe that supplying two quotes is even more relevant now that pricing on limited company buy to lets is getting cheaper and rental calculations are now more generous than residential BTL rental calculations.

I have no doubt the buy-to-let market will continue to change and evolve and it will be particularly interesting to see the full outcome of the PRA consultation process. The market for limited company buy-to-lets is worth keeping an eye on, as it is presenting some interesting opportunities for landlords.


Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact RLA Mortgages.

This is a financial promotion and in no way should it be viewed as a personal recommendation or advice. Before a recommendation/advice can be given you should seek independant mortgage or financial advice.
RLA Mortgages is operated exclusively for the RLA by 3mc, which is authorised and regulated by the Financial Conduct Authority. FCA No. 302992. ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Although the FCA regulate the way the majority of mortgages are sold, in most cases they do not regulate buy to let mortgages. This means you may have less protection if things go wrong with a buy-to-let mortgage. All calls are recorded for training and monitoring purposes.

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New BTL Product Launched – BBR plus 1.55% with £500 Cashback

If you’re looking for finance on your next buy-to-let and wish a product linked to the Bank of England Base Rate, here’s a new mortgage deal you may find of interest. This product is available for both remortgages and purchases.
The mortgage has the following features:

  • Available for the purchase and remortgage of rental property to 60% loan to value
  • 1.55% plus BBR until 1/11/18 with a current pay rate of 1.8% (4.52% APRC) reverts to lenders variable rate currently 4.74%
  • 1% early repayment charge until 01/11/18
  • £500 cash back payable upon completion

£995 lender arrangement fee (can be added to the loan) & £295 broker fee for RLA members (normally £495)

Interested? Contact RLA Mortgages today:

E: info@rlamortgages.co.uk
T: 0844 858 4420


Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact RLA Mortgages.

This is a financial promotion and in no way should it be viewed as a personal recommendation or advice. Before a recommendation/advice can be given you should seek independant mortgage or financial advice.
RLA Mortgages is operated exclusively for the RLA by 3mc, which is authorised and regulated by the Financial Conduct Authority. FCA No. 302992. ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Although the FCA regulate the way the majority of mortgages are sold, in most cases they do not regulate buy to let mortgages. This means you may have less protection if things go wrong with a buy-to-let mortgage. All calls are recorded for training and monitoring purposes.

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The continuing evolution of the HMO market

The market for housing of multiple occupancy (HMO) has gone from strength-to-strength over the past year and there are good reasons to believe this trend will continue in the future.

Why? Firstly, landlords are seeking higher yielding investments as returns from the mainstream rental market continue to come under pressure. Having multiple tenants in one property generates more rental income and there is less dependency and risk for the landlord if income is derived from several sources.

Secondly, HMOs have become popular not only with student and social tenants who have been the mainstay of the HMO market to date, but also with a growing band of professional tenants. These tenants are choosing HMOs not just because of lower costs but also a range of lifestyle factors including location, proximity to transport links and a desire to live in a more communal environment with like-minded friends.

These developments have been driving a number of changes, both amongst landlords and lenders. Landlords have recognised the changing demand for HMOs and are starting to develop properties for the young professional market, with high quality finishes, internet access and wide-screen TVs in communal areas. This type of HMO is particularly popular in large urban areas such as London and Manchester where young professionals are less keen (and able) to get a foot on the first rung of the housing ladder.

Landlords are therefore seeking suitable properties capable of being converted into accommodation for typically 6-9 tenants. We’re also starting to see a new generation of landlords who have focussed to date on the traditional rental market but are now branching out into the HMO market.

There are issues HMO landlords need to take into consideration. HMOs may generate higher yields but take more time, effort and cost to manage. It’s not untypical for landlords to allocate 25-30% of rental income to management and maintenance costs. Landlords also need to be aware of the way in which HMOs are categorised and the rules regarding licencing and planning permission. Licencing and planning are not connected, so investors need to ensure they understand both, especially when seeking mortgage funding.

Technically a home becomes an HMO if it is occupied by 3 or more people forming 2 or more households, where more than one household shares amenities such as a toilet, bathroom and kitchen. From a planning perspective, the Town & Country Planning Act 1990 (TCPA) states that any change of use of a property requires planning permission, unless it is ‘non-material’ or permitted by General Permitted Development Orders (GPDO) which are based on the following classification:

• C3 Dwellinghouse – a normal house or flat occupied by a single person, couple or family.
• C4 House in multiple occupation – a normal house shared by between 3 and 6 unrelated individuals as their main residence. They will share facilities such as a lounge, kitchen and bathroom.
• Sui Generis HMO – these are larger properties which cannot be classified as C3 or C4 and they will accommodate 7 or more unrelated individuals.

For HMOs it is permitted to change use from C3 to C4 (and back again) unless what is called an ‘Article IV’ direction is imposed by a local authority, which removes the permitted development rights. Change of use to a Sui Generis HMO does require planning permission. The planning rules can quickly become a minefield and investors should take professional advice if in any doubt.

Licencing is a different issue and if a property is let to 5 or more tenants and has 3 or more stories with a shared kitchen, bathroom or toilet, then a mandatory licence will be required (unless the building has been converted into fully self-contained flats – in which case the property is not classified as an HMO!). Some local authorities will limit the number of HMOs in a particular area, so it’s worth checking prior to purchase. Again, if in doubt, investors should get professional advice.

Lenders have also responded to the emerging HMO market. Over the course of the past year, we’ve seen more lenders enter the HMO market and existing lenders announce more accommodating criteria and lower pricing.

For example:
• Axis Bank has improved its criteria to include students and its 2-year variable rate HMO product has no early redemption charges and no pricing differential from its mainstream buy-to-let range.
• Paragon Mortgages has launched its Premier range to compliment its core range of products, with the Premier range going up to 80% (rather than 75%) LTV. The Premier range is only available via select brokers including RLA Mortgages.
• Interbay Commercial will also lend up to 85% LTV on properties up to 8 beds, with no pricing differential from its mainstream buy-to-let range.
• Precise Mortgages has entered the HMO market and will lend on properties with up to 8 beds.

I have no doubt we’ll see more lenders responding to the greater level of interest in HMOs. This is a market for landlords to watch carefully.

For further information on Buy to Let mortgages both for individuals and Limited Companies please contact RLA Mortgages on 0844 858 4420 or visit the website www.rlamortgages.co.uk


Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact RLA Mortgages.

This is a financial promotion and in no way should it be viewed as a personal recommendation or advice. Before a recommendation/advice can be given you should seek independant mortgage or financial advice.

RLA Mortgages is operated exclusively for the RLA by 3mc, which is authorised and regulated by the Financial Conduct Authority. FCA No. 302992. ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Although the FCA regulate the way the majority of mortgages are sold, in most cases they do not regulate buy to let mortgages. This means you may have less protection if things go wrong with a buy-to-let mortgage. All calls are recorded for training and monitoring purposes.

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Evolution of the buy-to-let market

The big question hanging over the buy-to-let market is whether the chancellor intends to squeeze it so hard that it starts to implode under the pressure, or whether the tax and regulatory changes being introduced will simply bring about the next phase in the market’s development?

There can be little doubt that the chancellor sees the buy-to-let sector as a threat to the wider housing market, particularly in terms of making life more difficult for first-time buyers wanting to get a foot on the first rung of the housing ladder. When the chancellor announced the increase in stamp duty for landlords he said: “People buying a home to let should not be squeezing out families who can’t afford a home to buy.”

The tax changes being phased in from 2017 are effectively imposing a tax on turnover rather than on profit, which is not the way tax is usually levied in the UK. Landlords have good reason to be concerned, because for some higher rate taxpayers it could turn profitable businesses into loss makers.

To add to the challenges facing landlords, the Prudential Regulation Authority (PRA) is also planning to introduce new underwriting standards for buy-to-let mortgages. The changes being proposed in CP11/16 are designed to ensure that landlords will be able to afford the mortgages for which they are applying, taking into consideration the additional financial burden of the tax changes being implemented. At the end of April, for example, TMW made the announcement that it’s increasing its rental coverage calculation to 145% whilst at the same time reducing its maximum LTV to 75%.

It will be interesting to see if this move from one of the market’s biggest mainstream buy-to-let lenders triggers a spate of similar changes from other lenders and whether it creates an opportunity for new and specialist lenders to fill the gap being created?

There is a danger with a string of such announcements being made one after the other that we jump to the conclusion that the end is nigh, but I feel that would be wrong. I don’t believe these developments will have the profound impact that some people are suggesting and my guess is that the buy-to-let market will remain in good health for some time to come.

The reality is that a number of lenders have already been making changes to their affordability models. Whether 145% rental cover and 75% LTV will become the new norm for mainstream buy-to-let lenders only time will tell, but I suspect a number of specialist lenders will tweak their business strategies to exploit potential new opportunities.

For example, some lenders will introduce different rental stress tests for limited companies and individuals, as the tax changes have less impact on limited companies than they do on higher rate taxpayers. In fact, such changes are already happening.

It also needs to be borne in mind that the PRAs proposed new underwriting standards will not apply to remortgages where there is no additional borrowing being undertaken. When you consider that approximately 60% of all buy-to-let transactions are remortgages, then there should be no reason for some landlords to become mortgage prisoners as a result of the proposed changes. This does need to be caveated as not all lenders will have the technological capability to address this within their processing systems.

I suspect we’ll also see those lenders who do not impose a limit on the number of properties that can be mortgaged with other lenders, being quicker to respond to the opportunities. Smaller and newer lenders may also be more fleet of foot in making the systems upgrades that are necessary to accommodate product and criteria changes.

The buy-to-let market faces challenges in getting the balance right as it responds to the changes being enforced on the market. The lending industry has an impressive track record for being able to take most things, regulatory or otherwise, in its stride. There is, therefore, an argument that says the market will go through a period of adjustment but, in the longer-term, will continue its upward trajectory.

However, the industry also needs to show that the tax and regulatory changes have made a difference and not give the chancellor cause to create further measures to dampen-down buy-to-let lending. Perhaps a period during which the market flatlines for a couple of years could be what’s needed?

The irony, of course, is that the chancellor needs property investors to supply rental property into a market which neither the government not local authorities are doing much to satisfy themselves. It the supply of rental accommodation starts to dry-up, then many youngsters could find themselves stuck between a rock and a hard place, unable to raise a sufficiently large deposit to buy and unable to afford rising rents pushed up by a diminishing supply of rental property.

My view is that the buy-to-let market is going through an interesting phase in its evolution but is not in danger of extinction. The chancellor may squeeze investors hard, but he can’t afford to kill them off altogether because that would give him a far more difficult problem to resolve.

For further information on Buy to Let mortgages both for individuals and Limited Companies please contact RLA Mortgages on 0844 858 4420.


Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact RLA Mortgages.

This is a financial promotion and in no way should it be viewed as a personal recommendation or advice. Before a recommendation/advice can be given you should seek independant mortgage or financial advice.

RLA Mortgages is operated exclusively for the RLA by 3mc, which is authorised and regulated by the Financial Conduct Authority. FCA No. 302992. ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Although the FCA regulate the way the majority of mortgages are sold, in most cases they do not regulate buy to let mortgages. This means you may have less protection if things go wrong with a buy-to-let mortgage. All calls are recorded for training and monitoring purposes.

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The rental stress of running a limited company

When the chancellor announced last summer that he intended to make the tax regime less favorable for individual buy-to-let landlords, it was inevitable that investors would look for ways to overcome this significant challenge.

The proposed changes mean that landlords will no longer be able to offset their mortgage interest payments against their tax bill and receive tax relief at the higher rates of 40% or 45%. The new tax regime is being introduced on a phased basis starting in April 2017 and will be fully in force by the beginning of the 2020/21 tax year, meaning that individual landlords will only be able to claim back relief at the basic rate of 20%.

For lower rate taxpayers, it makes no difference but for higher rate tax payers the changes have the potential to turn profitable businesses into loss makers. One potential solution to this issue is for landlords to hold their property portfolios within a limited company structure, thereby taking them out of the personal tax regime altogether and subject to corporation tax instead.

There’s nothing new in running a buy-to-let property business as a limited company, but many thousands of individual investors have felt that a limited company structure has not been appropriate for them. However, it’s thought that about a third of all buy-to-let mortgages are now being issued to companies, compared to just 15% last October and it seems inevitable that this trend will continue.

Many lenders have revisited their buy-to-let criteria and, in the light of the tax changes being introduced, some have made changes to the rental stress test being applied, to reflect the impact the new tax changes will have on borrowers’ ability to service their loans.

For example, one lender has introduced a higher notional rate for individuals rather than limited companies, meaning that less gearing is available to individual investors. At the time of writing this lender had a rental stress test of 125 x 5% for limited companies and 125 x 5.35% for individuals, whilst other lenders have adjusted their stress tests to reflect different borrower scenarios. Whether these changes are beneficial or not will depend on your individual circumstances and needs.

Some lenders including Paragon, Foundation Home Loans, Aldermore and Shawbrook are also no longer applying a pricing premium on limited company buy-to-lets, which is making more brokers and borrowers aware of the growing number of options available to limited companies. I have no doubt that as time ticks on; more lenders will offer competitive deals to limited companies.

I believe the time is fast approaching when it makes sense for brokers to supply their buy-to-let clients with two sets of quotes when it comes to new purchases: one for an individual buy-to-let and one for a limited company buy-to-let. Clients should then be advised to seek advice from a specialist property accountant to determine which is the most advantageous option for them.

Deciding whether a limited company structure is right or not is a complex issue and one which doesn’t depend purely on the chancellor’s recent tax changes and the availability of specialist mortgages.

A range of other factors also need to be taken into consideration, not least of which are the cost associated with setting-up and running a limited company and the various exit strategies that are available when it comes to winding the business-up in the future.

For further information on Buy to Let mortgages both for individuals and Limited Companies please contact RLA Mortgages on 0844 858 4420.


Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact RLA Mortgages.

This is a financial promotion and in no way should it be viewed as a personal recommendation or advice. Before a recommendation/advice can be given you should seek independant mortgage or financial advice.

RLA Mortgages is operated exclusively for the RLA by 3mc, which is authorised and regulated by the Financial Conduct Authority. FCA No. 302992. ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Although the FCA regulate the way the majority of mortgages are sold, in most cases they do not regulate buy to let mortgages. This means you may have less protection if things go wrong with a buy-to-let mortgage. All calls are recorded for training and monitoring purposes.

 


 

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No end to rising demand for rented homes

A new analysis out today by Savills has suggested that demand for rented homes will rise by more than one million households over the next five years despite government measures to help ‘generation rent’ become ‘generation buy’. View Savills report.

RLA Mortgages adds that with the recent tax changes imposed by the government this report shows there will still be demand for landlords in supporting the PRS. The Council of Mortgage Lenders is predicting a slight increase in the number of Buy to Let transactions this year when compared to 2015 with a greater proportion being for remortgages.


Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact RLA Mortgages.

This is a financial promotion and in no way should it be viewed as a personal recommendation or advice. Before a recommendation/advice can be given you should seek independant mortgage or financial advice.

RLA Mortgages is operated exclusively for the RLA by 3mc, which is authorised and regulated by the Financial Conduct Authority. FCA No. 302992. ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Although the FCA regulate the way the majority of mortgages are sold, in most cases they do not regulate buy to let mortgages. This means you may have less protection if things go wrong with a buy-to-let mortgage. All calls are recorded for training and monitoring purposes.

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The Buy-to-Let remortgage myth

There is an urban myth amongst some buy-to-let landlords and brokers that a rental property cannot be remortgaged within six months of purchase.

Not true.

The reality is that although many (but not all) mainstream buy-to-let lenders won’t allow a property to be refinanced within six months, there are several specialist and commercial lenders who are quite happy to lend on this basis.

Why would a landlord want to refinance a property they purchased less than six months ago?

It’s worth bearing in mind that only about a third of buy-to-let properties are mortgaged and the majority are cash purchases. Buying for cash not only enables an investor to negotiate from a position of strength, but also buy the type of property that may be difficult to mortgage at the time of purchase. It may, for example, be in a poor state of repair and require significant refurbishment before it’s in a suitable condition to let.

The investor may also intend to convert the property into an HMO or multi-unit and then mortgage the property when the conversion or restoration work has been completed. Buying with cash and then mortgaging at a later date and at an enhanced value, makes an awful lot of sense.

Which all sounds very sensible, so why are some lenders unwilling to lend within six months of purchase? Part of the problem is money laundering and lenders may want to know where the funds came from to finance a cash purchase. But if the funds can be proven, then there should be no problem.

Another issue is that lenders are not keen on borrowers who continually re-leverage properties and, for that reason, many will only lend against the original purchase price of a property, rather than the enhanced value following restoration work.

One solution for investors who can’t fund the purchase of a property with cash but who want to restore a property and then apply for a mortgage based on its enhanced value, is to use bridging finance. Aldermore and Precise both offer  ‘bridge-to-term’ mortgages which are designed to provide bridging finance for the acquisition of a property which can then be remortgaged onto a term deal at a later date. What’s more, the products offer the added benefit of placing no restrictions on the amount of money a landlord can leverage from the property.

So, for example, an investor may buy a property with a purchase value of £100,000 using a bridging loan of £70,000 (70% LTV). They then carry out £20,000 of restoration work which results in an uplift in the value of a property to £150,000. By opting for a ‘bridge-to-term deal’ the borrower can then remortgage the property to 80% of the enhanced value, which is £120,000. What’s more, this can be done during the six months following the purchase of the property.

Another option for borrowers who don’t want to bridge is a mortgage from a specialist lender who will lend against the enhanced value of the property. In the above example, some lenders will provide a mortgage based on 90% of the purchase price and the cost of restoration (£100,000 + £20,000 x 90% = £108,000) proving this does not exceed 75% of the final uplifted value. Again, in this example, 75% of the final £150,000 value = £112,500, so a loan of £108,000 would be fine. Again, these deals can be completed within six months of purchasing the property.

The amount that lenders want investors to leave in the property is sometimes referred to as ‘hurt money’. It’s another way of saying it’s the investor’s skin in the game!

There are, therefore, several options for landlords who want to purchase rental property and then remortgage within six months. It doesn’t matter if it’s a straight purchase and then remortgage or if it involves restoration or conversion work. There are competitive deals to be had which offer the required flexibility and are available for limited companies, HMOs, multi-lets and unusual properties.

Refinancing within six months is more common than you may imagine and, contrary to popular misconceptions, these deals can be placed with a number of lenders.

For further information on Buy to Let mortgages both for individuals and Limited Companies please contact RLA Mortgages on 0844 858 4420 or visit the website www.rlamortgages.co.uk


Please note lenders have different minimum criteria requirements and not all landlords and property types will qualify for this specific product. For further information contact RLA Mortgages.

This is a financial promotion and in no way should it be viewed as a personal recommendation or advice. Before a recommendation/advice can be given you should seek independant mortgage or financial advice.

RLA Mortgages is operated exclusively for the RLA by 3mc, which is authorised and regulated by the Financial Conduct Authority. FCA No. 302992. ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. Although the FCA regulate the way the majority of mortgages are sold, in most cases they do not regulate buy to let mortgages. This means you may have less protection if things go wrong with a buy-to-let mortgage. All calls are recorded for training and monitoring purposes.

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