|
January 2017
Buy to Let - More Government Intervention
Due to increased concerns on an overheated buy to let property investment
market, the UK government has implemented a new rental calculation to be adopted
by lenders.
This comes on top of the increase in stamp duty tax for second properties and
changes in tax treatment, for example on mortgage interest relief.
The changes best illustrated in the example below.
| Example 1 |
Example 2 |
| Purchase price/Valuation |
|
| £250,000 |
£250,000 |
| Mortgage Advance |
|
| £187,000 |
£187,500 |
| Rental Earned Per Month |
|
| £950 |
£950 |
| Rental Calculation to 31/12/2016 |
Rental calculation From 01/01/2017 |
| Average pay rate 4.50% Stressed at 125% |
Notional Rate 5.50% Stressed at 145% |
| £187,500@4.5% = £703.12 interest only per month. |
£187,500 @5.50% = £859.37 interest only |
| Stress at 125% = £878.90 |
Stress at 145% = £1246.03 |
With example 1 the advance required meets the rental calculation and £187500.00
would be available.
With example 2 there is a shortfall of £296 per month on the rental received.
Using the new calculation, with a rental of £950.00 per month £143,000 would be
available and not the £187,500 required.
The general rule on the rental assessment is that for every £1000 borrowed,
monthly rental must be assessed at £6.64 per month.
We have access to a lender that will consider “topping up” a shortfall in the
required advance using earned income. This is subject to affordability and
payment in an acceptable currency.
Landlords with 3 properties will now be classed as professional and will not be
able to access the high street lenders to fund further property acquisition.
Depending on country of residence, we have access to lenders who have higher
property limits.
International Mortgage Plans January 2017
Mortgage Enquiry Form
Back to IMP Homepage |
