Paul Martins explains why you have until the end of the year to raise capital against a low-yielding property you own personally.
Time is running out for landlords looking to release money from any lower yielding properties owned personally because, come January, lenders will be obliged to strengthen their Income Cover Ratios for personal borrowers.
For some years now the average ICR – the amount by which the rent must cover the mortgage - has been 125% but it’s increasing. This means that landlords will not be able to borrow as much as before on these properties (unless they hike up the rent). In fact, in response to the Prudential Regulation Authority’s Supervisory Statement SS13/16, some lenders have already upped their ICRs, many to 145% on personal borrowing, so time really is of the essence.
Come January, background checks will get tougher too which means that landlords will need to provide more information surrounding affordability to support mortgage applications. So be prepared for more paperwork!
We are already seeing an increase in enquiries about releasing capital from landlords, particularly in London and the South East, where property values have risen more quickly than rents.
If you would like to run through a specific capital raising scenario, do get in touch as soon as possible and I will run you through what’s currently available for your circumstances.
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