New Rules – BTL Mortgages:
From 1st January 2017 the Prudential Regulation Authority (PRS) is introducing tougher requirements for buy-to-let (BTL) borrowers, following a deadline set by the Bank of England.
In a recent interview with Simon Allen of Searchlight Finance editor of ‘Property Investor News’ Richard Bowser (pictured) talks with him about the upcoming changes to buy-to-let lending brought about by the government’s desire to have more control over the sector – see video link below.
Lenders will in future require landlords to have higher levels of rent relative to their mortgage costs, as well as stress-testing all new mortgages at a rate of 5.5pc.
Lenders will however be able to factor in rent rises of up to 2pc a year when deciding whether a landlord will be able to afford a property – this is a new factor which they were not allowed to take into account before.
Landlords with four or more properties will also have to give out more information about their income and debts and of course this tougher mortgage regime comes ahead of tax changes to come on landlords’ income, due to be phased in from April this year.
BTL Mortgages are split into two categories: Business BTL mortgages (for those landlords making BTL an investment process) which are not regulated by the FCA, and the Consumer BTL Mortgage (for those landlord renting their own home out of necessity – the accidental landlord).
Here are a few points to consider when comparing mortgage offers:
- Your occupation – some lenders won’t deal with property developers
- Income – lenders range from no minimum to £50,000
- How many properties you own – restrictions on how many you can have with some lenders and rates may increase?
- Your credit record – missed payments or worse, then the number of willing lenders will reduce
- The rent to interest cover – will affect how much you can borrow
- Type of tenants – there are restrictions on students, local authority tenants etc;
- Type of property – new build, flats/apartments
- Interest only loans – how will it be repaid?
- Maximum term of loan – 25-40 years depending on your age
- Set up fees- Zero to 3.5% of the loan and fixed fees. Usually the higher the fee the lower the rate
- Reverting interest rate – what you will pay after the initial period expires.
- Buy To Let mortgages are usually available on an interest only, full repayment or part interest and part repayment basis
- Loan terms vary from 5-40 years
- Age 25-85 (by end of mortgage)
- Buy To Let mortgages can be available to individuals, partnerships and Limited companies
- Usual minimum property valuation is £50,000
- Typical LTV up to 85%, but typically 75%.
Mortgage Expert gives his view:
Simon Allen of Searchlight Finance highlights just why anyone considering taking out a new buy to let mortgage in 2017 really needs to understand the implications of these Prudential Regulation Authority (PRA) led regulatory changes.
If you are intending to apply for a buy to let mortgage in 2017 for a new property investment purchase, or you are looking to re-mortgage an existing property to raise further funds, then this video interview is well worth watching says Richard Bowser.
Anyone considering a mortgage deal in 2017 should take note of the points made in this video interview
Buy-to-Let Mortgages in 2017 https://t.co/nBKrFZlwY8
— LandlordZONE (@LandlordZONE) January 9, 2017