The world of buy to let is unrecognisable for that of 15 or even 10 years ago. Long gone are the days of 110% mortgages, self-certification and same day remortgages.
Investors now find themselves in an environment where they are seemingly being attacked from every angle. Increase in stamp duty levies, the tapering out of mortgage interest relief and the introduction of portfolio lending assessments. This is where a mortgage company will require much more detail from the Landlord in terms of personal assets and liabilities and income than they had previously.
This has led to many “one-off” landlords - and some more established portfolio landlords - selling off their investments to avoid these additional costs and difficulties in obtaining finance.
Other landlords trying to protect themselves by transferring properties into a Limited Company structure, where mortgage interest costs can still be offset against profit. We would highly recommend speaking to your accountant before pursuing such a strategy as it does come with many other tax implications.
Lending to Limited Companies is now fairly mainstream, and the cost of doing so is not dissimilar to that of personal mortgages. For example, a fixed 5 year deal at an 80% loan to value will attract an interest rate of sub 4%. However, there are also associated legal costs and the mortgage arrangement fees that can vary between 2%-3% of the amount borrowed, adding to the overall cost.
By comparison, personal lending tends to be characterised by much lower arrangement fees despite the fact that the rate of interest charged is really much the same as that for lending to Limited Companies.
Interest rates themselves have seen a recent rise and there is talk of at least one, if not two, more rises later this year. While landlords have enjoyed rock-bottom rates for a long time now, the timing of an increase in rates, combined with the harsher tax and legislative BTL environment we now find ourselves in, will be a particularly bitter pill for landlords to swallow.
