The tax relief on commercial mortgage interest payments is being reduced from April 2017. Jo Thornhill, writing for ThisIsMoney.co.uk in Feburary 2017, has suggested that landlords who find a cheaper mortgage deal may be able to make savings that will make up for the reduced tax relief.
Currently, tax relief on mortgage interest payments is based on a landlord’s tax rate. The rate will be gradually reduced so that by 2020, there will be one standard rate of 20%. This means that landlords who pay tax at a 40% rate will be worse off when the rate is reduced to 20%. Though the changes are phased in over a four-year period, they could mean higher tax bills for many landlords.
To remain profitable as costs rise, landlords need to look at areas where they can save money. With interest rates on many mortgage deals at record lows, considerable savings can be made by switching from a high-rate mortgage to one at a lower rate.
Average rates on buy-to-let mortgages are 3.77%, a fall from 4.09% a year ago according to ThisIsMoney.co.uk. Five-year fixed rate commercial mortgage deals can be found at less than 2.5% interest, though a fee of around £2,000 is charged and a deposit of at least 40% is required.
A mortgage broker has access to a wide range of commercial mortgage deals and can work with landlords to find a mortgage that will meet their needs and save them money.