James Skidmore, Head of Mortgages at AAG, looks at how Buy to Let investors are going to be hit with even more changes.
“Following the stamp duty rise, buy to let investors are now going to be affected by changes imposed by the Bank of England. These changes will see mortgage lenders having to consider the applicants wider finances, rather than their rental income.”
“It follows affordability requirements which were set down in the Mortgage Market Review in 2014. Lenders will have to establish whether rental income will be high enough to produce a satisfactory margin over the mortgage interest. Fees and management costs, as well as the potential for higher taxes on the borrower’s cash flow will also need to be taken into consideration.”
Stricter lending criteria may mean that landlords may need to review their mortgage and restructure their property portfolio.
The increase in stamp duty and the changes to buy to let mortgage tax relief (due in 2020), have changed the risk profile of property investing and, of course, the potential profitability. “Any investments should be reviewed as part of your wider personal finances to ensure they are performing in line with your expectations and risk profile. “Review your buy to let investments now, before these changes come into place” James suggests.
Your home or other property may be repossessed if you do not keep up repayments on your mortgage.