Why personal BTL borrowers can borrow more BEFORE 1st January

Apply for a buy to let mortgage NOW before stress tests and income cover ratios get tougher.

This means that for landlords borrowing in a personal capacity, very soon you will not be able to borrow as much against a property as you can right now.

As we have reported previously, some lenders have already changed their rent to interest cover calculations because from 1st January 2017 they must comply with new underwriting guidelines (as set out by the Prudential Regulation Authority) which insist that lenders conduct tougher affordability checks to ensure that personal borrowers can repay their mortgages should interest rates rise to 5.5%.

The new rules are being introduced to ensure that lenders factor in the changes to income tax relief which is being imposed on landlords from 2017.

Lenders which have announced changes include TSB, The Mortgage Works, Paragon Mortgages, Mortgage Trust, Kent Reliance, Fleet Mortgages, Precise, Coventry Godiva, Virgin Money and our own lending brand Keystone Property Finance.

NEED BUY TO LET FINANCE? What should you do if you want:

A buy to let mortgage for a purchase in your personal name
Please do get in touch with us ASAP so that we can get you an Agreement in Principle (AIPs) and/or submit a mortgage application before the end of this week. If you leave it any later, you will be affected by the changes.

To raise capital by remortgaging your rental property
The underwriting changes will affect you, so do get in touch before the end of this week if you want to take advantage of current, lower RTI calculations.

To remortgage on a like-for-like basis
If you don't want to raise capital but simply want to remortgage onto a better rate to save money, you are less likely to be affected by the pending changes as the PRA does not want to create mortgage prisoners. However, to talk through the options do get in touch.

A limited company buy to let mortgage
The changes to affordability calculations do not affect landlords borrowing in a limited company capacity because they will not be affected by the changes income tax relief (limited companies are subject to corporation tax).

For more information, below you will find a variety of links to articles which explain the new rules and the tax changes. I’ve also included a link to a case study demonstrating how much more you could borrow now than when all buy to let lenders have switched to the affordability calculations on 1 January 2017.

As always, do get in touch to discuss your property finance requirements. Buy to let mortgages, commercial mortgages, development finance, short-term finance and residential mortgages... we can help.

 

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CASE STUDY: Landlord borrows £246k more than he will be to from 1 January 2017

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How the new buy to let underwriting standards will affect lenders and borrowers
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gives his views on what the implications of tougher interest cover ratios and increased background checks will mean for landlords and buy to let lenders.

 

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