Many of you submitted questions for our Investing in the "New Normal" online event, and while we tried to answer as many as we could during the webinar, there were a few we didn't get to. Jeni Browne has written responses to some of those pressing buy to let investment questions for you in this blog...
Hi, I am interested in buy to let but haven’t got a property in my name some lenders require it, is there a way around that?
If you are not a property owner, there are lenders who would give you a buy to let mortgage. These lenders will generally work on an affordability model, just like as if it was your own home. There are a handful of lenders who will not work on affordability. However, they will either require you to have a minimum income of over £80k or would look for a plausible reason as to why you are purchasing a buy to let when you are a non-homeowner (for example you have tied accommodation with your job). I would suggest giving us a ring, and we can chat through your situation and see what’s possible.
What is the general rule of thumb on when it is best to form a company to own and operate your Buy to Let (BTL) portfolio? We currently have 4 Furnished Holiday Let’s (FHL’s) and are considering buying 5-6 more properties and switching over everything to BTL’s.
You will need to speak to a professional tax advisor or accountant first as we don’t provide tax advice. However, generally speaking, if you add together your gross income and rental income and the figure puts you above the basic tax rate (more than £50,000), it may be advantageous to invest via a Limited Company.
Landlords also use Ltd Company structures for other tax benefits, but again, this is something you’d need to discuss with a tax advisor.
Do private landlords get any support from the government, as since the government announced that tenants cannot be evicted for three months (now extended for another three months), the tenants stopped paying rent.
Yes, the government have put in place the mortgage payment holiday facility, and also various schemes to provide an injection of capital to help with cash flow. We would, however, recommend that you only take advantage of these schemes if you really need them, as they may impact your eligibility for mortgages and other business loans in the future. You can read our recent article on the possible repercussions here.
I understand that lenders are taking a dim view of applicants who received a mortgage holiday. How are lenders reacting to those who took a bounce back loan (BBL)? I am already aware that BBL money cannot be used as a deposit.
Lenders are diligent when assessing borrowers who have sought financial assistance during the pandemic. However, if they are comfortable that the borrower is not in financial difficulty, they are mostly happy to proceed as normal.
Have many properties been instructed for sale in recent weeks? I know we have had a pick-up in activity but have people actively been looking to sell/move in significant numbers?
There has been a significant increase in buyer activity since lockdown measures eased, with many reports showing higher activity than in the months before the restrictions. Reports show while many people are looking to buy, the number of properties on the market doesn’t satisfy the level of demand (by some 175,000, according to Rightmove). This suggests we can expect to see house prices continue to climb as demand outstrips supply.
How will the recent furlough process affect the ability to obtain mortgages for first-time investors going through a Ltd company? Have the rules got stricter?
For those that are not on furlough, nothing has changed in lender criteria. If you are currently furloughed, lenders will want to know your current level of income and may ask for a letter from your employer to confirm that they intend for you to return to work. Furthermore, there has been no decrease in lenders’ acceptance of first-time landlords, either through Ltd Company or personal name.
Post lockdown, are lenders tightening or restricting their lending criteria?
The main change we have seen from lenders is the scaling back of mortgage Loan to Value (LTV) limits; pre lockdown you could get 85% on a buy to let mortgage, however currently 80% is the highest available at the moment. Apart from that, lender criteria remain much the same. The only thing we are already experiencing, and expect to continue for some time, is greater due diligence checks on those who have taken mortgage payment holidays, have been furloughed or who are self-employed. In these cases, lenders are asking more questions about applicant’s financial situations to ensure that they are not lending to those in financial difficulty and would, therefore, be at higher risk of falling into arrears. Generally, however, lenders are lending in much the same way as they were pre lockdown.
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24th June 2020