The Autumn Budget 2017 will be announced on 22nd November and already there are rumours that the Chancellor plans to reduce the annual pension contribution allowance, the lifetime pension allowance and tax relief on pension contributions. If any of these reductions happen, you might consider buy to let as an alternative pension strategy to boost your income in later years. Here are some pointers to bear in mind if you thought you might not qualify.
In recent years many lenders have increased the maximum age limit of borrowers to 85 years at the end of the mortgage term. This means that, even when you’re 60, you could get a mortgage term of 25 years. There are also a few options for even older borrowers.
As long as you can prove your income, some lenders will lend even if you earn less than the industry standard of £25k pa. If you’ve already retired, earnings can be from state or private pensions, part time work or income earned solely from rent.
Interest only terms
As buy to let, for the most part, counts as a business not consumer transaction, interest only terms are widely available which gives you greater cash flow each month. At the end of the mortgage you can sell the property to repay the capital, and if the property’s value has risen, there will be cash left over for you too.
A capital and interest repayment mortgage will reduce your cash flow on a monthly basis but once the mortgage ends you will own the property outright (as long as the property’s value has not depreciated). Assuming capital appreciation, you’ll have more options, i.e. you could continue to let it out, you could sell it, or you could move in.
Despite a recent rise in Bank Rate back to 0.5%, interest rates are still very low and I would be very surprised if we saw increases commensurate with historic levels.
In summary, if you feel that any of the above falls within your own personal circumstances or would like to discuss any of your existing buy to let properties then please feel free to get in touch.
Paul Martins has left Mortgages for Business for pastures new. For more information or for any questions relating to this blog, please contact the BTL Team on 0345 345 6788, where one of our consultant mortgage brokers will be happy to assist.