With so many drastic changes taking place in 2017, there have also been plenty of changes to the housing market. Mortgage tax relief changes, stamp duty costs and Brexit are just a few of the things to be wary of when buying a property this year.
So, If you have been thinking about purchasing a second property in 2017 but don’t know where to begin, don’t worry! North West property solicitors Abacus Law are here to lend a helping hand.
Equity or buy-to-let mortgage?
Equity – Here you can remortgage your first property, using the equity to put a deposit down on the second property. Where possible, you could use the equity to buy the second property outright.
If you do decide to take out a second mortgage, you will need to demonstrate to your provider that you will be able to pay off both houses.
Buy-to-let mortgage -This option should be implemented if you plan on renting the second property out. A minimum deposit of 24-40% will be necessary to secure a good deal. However, from this year, the Prudential Regulation Authority (PRA) will be rolling out new rules for the buy-to-let market. This will put stricter underwriting standards on buy-to-let mortgages.
A new mortgage tax relief
New tax relief for landlords are being introduced as of April 2017. Presently, landlords can deduct the cost of items from their rental income such as repairs, mortgage interest and estate agent fees.
When the new tax relief kicks in, landlords will still be able to deduct these expenses but taxpayers on a higher rate can only deduct a small proportion of their mortgage interest rate costs from their rental profits. However, don’t fear, as most basic rate-paying landlords won’t be affected.
When you buy your second property, there will be an additional 3% charge to the standard rate of Stamp Duty Land Tax.
- 3% on the first £125,000
- 5% on the amount between £125,000 to £250,000
- 8% on the amount between £250,000 to £925.000
- 13% on the amount between £925,000 to £1.5 million
- 15% on anything over £1.5 million
There have been many calls for this controversial stamp duty land tax to be reversed. Introduced in April 2016, this is something you will have to factor into your budget for 2017.
With so much uncertainty over what leaving the EU will mean for the property market, some experts believe in the long run that possible restrictions on migration may lead to mean less demand for rental properties. This is a risk to take into account if you intend to let the Property to tenants following Brexit as it may lead to a reduction in rental values.
When you are thinking about buying your second property, your investment will always be more valuable if you take the time to research the areas. For instance, Liverpool’s Baltic Triangle is set to undergo huge developments. This sort of knowledge on areas set to undergo development may yield rewards in the future.
Purchasing another property in 2017, especially buy-to-let, can be a complicated process, not to mention the legalities that come with being a landlord. It’s always advisable to seek the assistance and experience of a solicitor well versed in property law.