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Buy To Let
If you are keen to explore your options as a landlord for the first-time, you need to be aware that a raft of reforms have impacted on this sector over the last year.
For example, around 300 local authorities now require you to register as a landlord, while others are consulting on the introduction of a register. Check your local council’s website to see if this will affect you.
Landlords will also need to register with a redress scheme in future, in order to solve tenancy disputes. At this time, it remains unclear whether this will be overseen by extending the remit of an existing body or require a new body to be established. But the commitment to introduce such a scheme is firm.
In addition, any property to be leased must now have a minimum energy efficiency rating of E. (If you’re a seasoned investor, you’ll be aware that tenancies set up before April 2018 have until 2020 to comply.) Providing false information on this could lead to a fine of up to £5000, so you must be clear about the energy rating of any property you intend to buy now, or in the future.
- You could end up paying less
- Track the Bank of England base rate
- Another great advantage
When looking at the overall condition of a property, remember there are also proposals to introduce inspections on rented premises every three years.
Then there’s tax change: in the current tax year (starting on 5 April 2018) you can offset 50% of your mortgage interest for tax relief as a landlord, but this allowance will disappear completely by 2020. So, on any purchase you are currently considering, it will pay to do your sums carefully.
Lenders are also imposing their own tougher restrictions on portfolio landlords. If you are considering a fourth property (or above) then you now need to show full financial information for each existing property when applying for new finance. If your portfolio is heavily mortgaged, it could result in some lenders turning down your application for a new loan.
If you’re classed as self-employed, the other thing to bear in mind is that any loan for Buy to Let is assessed on your self-employed profit (that’s after deduction of expenses), and is also secondary to the potential rental income from the property.
As we saw last year, taxation rules are always changing, so we recommend you consult us in advance of your plans. We can review the tax implications of any planned purchase, before you commit, ensuring that the best approach is taken for your personal circumstances.
As a mortgage is secured against your property, it could be repossessed if you do not keep up the mortgage repayments.