Regulation changes have made things more difficult for landlords. Tax relief on mortgage interest payments has been reduced and new affordability rules have made it tougher for some landlords to findnew mortgages. Lenders have reacted by making their buy-to-let commercial mortgages more attractive.
Some lenders have reduced interest rates on fixed term mortgages by between 0.10% and 0.15%. They have also abolished arrangement fees and many are offering free property valuations.
To reduce their tax bills, some landlords have formed limited companies to own properties. This has prompted lenders to launch more commercial mortgages targeted at limited companies. These mortgages offer up to 75% loan to value and can also be used to purchase houses of multiple occupancy (HMO).
Oher lenders have streamlined the paperwork requirements, with landlords needing to submit fewer documents.
New affordability rules are targeted at portfolio landlords who own four or more properties with mortgages. Some lenders are wanting rents to cover at least 145% of the mortgage payments, even if interest rates go up by over 5%. Not all expected rents will cover this amount which means that some commercial mortgage applications are being turned down. To make it easier for landlords, some lenders are now looking at a landlord’s other income and taking this into account when assessing the affordability of the buy-to-let mortgage.
In response to the new challenges, lenders have launched several mortgage products aimed at the first time buy-to-let landlord, and a broker can find the one best suited to you.