By Johanna Stewart
Financial Advisor, MAB
The first half of 2016 has been tough on landlords and has probably deterred new ones from entering the market, with the impending changes to mortgage tax relief, increased stamp duty on second properties and now Brexit and its immediate effect on the property market all weighing on the minds of investors.
You may be forgiven for wondering what else is likely to be thrown at you. The answer to that is an increase in buy-to-let rental calculations, which could lead to you becoming a mortgage rate prisoner.
As I am sure you are all aware, when a lender calculates what they will lend you there are a number of factors involved. Income and rental coverage are the main ones, followed by experience, credit history and the type of property.
There are lenders out there that will lend to landlords with less than £25,000 income, however a number of these have now increased their rental coverage of to 145 per cent, which is an increase on what has been the ‘standard’ 125 per cent.
What’s the impact on you? Put bluntly, you may lose money as you could be stuck on your lender’s standard variable rate (SVR).
You do of course have options, and I’m sure the first that comes into your head is to increase the rent. That’s great, but what if your tenants aren’t prepared or can’t afford to pay the increase and your property is left un-tenanted for a period of time? It will cost you.
Sell? You may not want to do this but feel forced into it by circumstances.
Stay on the lender’s SVR and hope they don’t increase it and you are able to weather the storm? Why sell or get stuck on the SVR when by getting ahead of the game now and reviewing your portfolio you can avoid these potential outcomes?
Speak to your local lettings manager who will be happy to pass on details of Leaders’ recommended financial advisers who can review your portfolio and potentially save you money.
Alternatively, get in touch with us at MAB and one of our mortgage experts will be delighted to assess your current circumstances and work out the right mortgage deal and strategy for you.
You may have to pay an early repayment charge to your existing lender if you remortgage. Your home may be repossessed if you do not keep up repayments on your mortgage.
There will be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1% but a typical fee is 0.3% of the amount borrowed.