[Finance] Buy to Let Mortgages

[Gritt23]

The main issue with buy to let mortgages here is the rental income stress tests especially for higher rate tax payers. It is based mainly on the rental income as to how much you can borrow, that is key

How does the stress test work?

 

[Uncle Spielberg]

How does the stress test work?

As a guide

basic rate tax payers 5.5% x 125%, ie £ 100000 lending needs £ 573 pm rent
higher rate tax payers 5.5% x 145% ie £ 100000 lending needs £ 665 pm rent

Generic advice, fact find needed to give specific advice

 

[mikeyjh]

As a guide

basic rate tax payers 5.5% x 125%, ie £ 100000 lending needs £ 573 pm rent
higher rate tax payers 5.5% x 145% ie £ 100000 lending needs £ 665 pm rent

Generic advice, fact find needed to give specific advice

£665 on £100,000, that's a tough ask in the south east!

 

[Uncle Spielberg]

£665 on £100,000, that's a tough ask in the south east!

Hence my comments on the thread

 

[Diablo]

Hence my comments on the thread

Presume the £665 per £100k is only on borrowed amount. No one surely Buys To Let without substantial deposit!

So am I right in saying if you have (as is needed with BTL mortgage) large deposit of say 50%. £200,000 property would let for more than £665 month so this would be ok on stress test ?.

 

[Uncle Spielberg]

£665 on £100,000, that's a tough ask in the south east!

As a guide £ 20000 purchase price, £ 50000 deposit - 25%, £ 150000 mortgage

Rent needed with most lenders

basic tax payer - £ 860 pm
higher rate tax payer - £ 997 pm

 

[Diablo]

As a guide £ 20000 purchase price, £ 50000 deposit - 25%, £ 150000 mortgage

Rent needed with most lenders

basic tax payer - £ 860 pm
higher rate tax payer - £ 997 pm

I`d like you to mis a nought off when I buy a house through you !

 

[Uncle Spielberg]

I`d like you to mis a nought off when I buy a house through you !

Sorry yes £ 200 000 !

 

[Gritt23]

As a guide

basic rate tax payers 5.5% x 125%, ie £ 100000 lending needs £ 573 pm rent
higher rate tax payers 5.5% x 145% ie £ 100000 lending needs £ 665 pm rent

Generic advice, fact find needed to give specific advice

So, someone who is a higher rate tax payer can borrow LESS against the same property!? Or effectively, needs to put in a higher proportion of the original cost.

Eg. Property worth £125k, that can earn you £600 pm rent, a basic rate tax payer would have to put in £20k, and could borrow £105k (slightly rounding up). But a higher rate tax payer would have to put up £35k, as they can only borrow £90k.

Really? That seems counter-intuitive, as any differentiation, I would have expected to be in favour of the HR earner, as someone being deemed to have more means to meet any difficulty. But tbh, I'm surprised there's a difference at all.

 

[Tom Hark Preston Park]

Seems to me the government could solve the housing crisis overnight by forcing swingeing tax penalties on the BTLers and forcing them to dump their 'property portfolio' earlydoors or feel the burn

 

[Uncle Spielberg]

So, someone who is a higher rate tax payer can borrow LESS against the same property!? Or effectively, needs to put in a higher proportion of the original cost.

Eg. Property worth £125k, that can earn you £600 pm rent, a basic rate tax payer would have to put in £20k, and could borrow £105k (slightly rounding up). But a higher rate tax payer would have to put up £35k, as they can only borrow £90k.

Really? That seems counter-intuitive, as any differentiation, I would have expected to be in favour of the HR earner, as someone being deemed to have more means to meet any difficulty. But tbh, I'm surprised there's a difference at all.

Correct

 

[Gritt23]

Correct

Couple of situations for you Sir.

If my wife and I are looking to do a Buy-to-Let, I'm HR, she's BR, do we make the application in her name and get to borrow more?
What if we do it in joint names?
What if we do it through a business we have formed where we are equal (and the only) shareholders?

Thanks.

 

[mikeyjh]

Seems to me the government could solve the housing crisis overnight by forcing swingeing tax penalties on the BTLers and forcing them to dump their 'property portfolio' earlydoors or feel the burn

Do you not think there is a place for a rental sector?

 

[Weststander]

people want housing and all parties said they will do something to assist homebuyers in the last election, so there is a mandate. politicans are just too scared to do the necessary and want to mess about the fringes, while others want to make it an immigration issue.


the real issue is market economics, i'm hardly a left wing. price of basic grassland 4-10k, price of same with planning £600k to >£1m. there is massive demand and that cost of land causes high cost of housing. fact is, going back to the original point, raising taxes will not create additional housing stock. planning both brown field and greenfield is woefully inadequate to address demand, as evidenced by prices.

Spot on with every key issue.

 

[Weststander]

Couple of situations for you Sir.

If my wife and I are looking to do a Buy-to-Let, I'm HR, she's BR, do we make the application in her name and get to borrow more?
What if we do it in joint names?
What if we do it through a business we have formed where we are equal (and the only) shareholders?

Thanks.

Tax point - as a NON ltd co you will gradually over 4 years lose all tax relief on the BTL loan interest and lender charges.

But should a ltd co own the BTL and obviously have the bank loan, the interest and lending fees will receive full tax relief against the company's rental income.

 

[osgood]

Thanks for that.I will PM him but I'm also very interested in the opinions of others.

Rest Assured , that youll be helping to ensure that none of the younger generations will ever be able to buy their own property...

 

[Thunder Bolt]

I don’t disagree with you. I spotted the immigration issue back in the 90’s when Bliar made a unpublicised unilateral decision to open our borders. But the damage is done and our population is stll increasing. The new homes are needed a.s.a.p. for everyone, whatever their background.

Immigration isn't the problem. Immigration figures also include students who come to Britain to study.

There are too many properties with just a single occupant now. Families used to live as families, but marriage break ups, family splits, mobile workforce have all had the effect of using up property.

 

[Uncle C]

Do you not think there is a place for a rental sector?

The BTL gravy train left the station some years ago. Landlords are now an easy target to raise funds for the Government and house prices are only going one way. Mugs game at present.

 

[Renegade1]

Rest Assured , that youll be helping to ensure that none of the younger generations will ever be able to buy their own property...

How?

You know what,there are plenty of my generation also who do not own homes.I'm from an older generation.You want to know why?Because when I was 18 and buying my first house as an investement with my parents,others around my age were spending their money on cars,clothes and entertainment.Many of these have never owned a home or instead own a small flat when they could have owned a large house.As for the younger generation,not quite sure how landlords are freezing them out.There's me thinking it was down to a growing population,houses not being built,plus natural market forces.What do I know.

 

[Renegade1]

The BTL gravy train left the station some years ago. Landlords are now an easy target to raise funds for the Government and house prices are only going one way. Mugs game at present.

For me property is always the best investment.
Where else can you put your money?Stocks and shares?not for me.