More changes for Buy to Let - take professional advice

Have you looked at your mortgage requirements recently?  Do you own investment properties?  Do you know about the upcoming changes to EPCs?  Are you prepared for the changes to mortgage interest tax relief?

The Buy to Let sector has been through some interesting times and it always seems to be this area that is targeted when it comes to tax and regulatory changes.  That is why I always stipulate that any property investor should have a good set of experienced property professionals around them when it comes to advice and recommendations.

For the tax year 2019/2020, landlords will only be able to offset 25% of their mortgage interest for tax purposes.  In 2020/2021, all of a landlord’s gross rental income will be taxable and they will instead be given a reduction in their tax liability equivalent to 20% of their mortgage interest.

This has led to an increase in landlords transferring their portfolios in to a limited company structure with all future purchases being bought in the limited company name.  This should be carefully considered, and professional tax advice taken.

In addition, minimum energy efficiency standards (MEES) were introduced in April 2018.  The standards affected all new lets and tenancy renewals in the private rented sector to have a minimum energy performance rating of E.  From April 2020, this will also cover existing tenancies.   Landlords will be unable to rent properties until any works are done and the minimum rating is achieved.   It will be illegal to rent out a failing property and landlords can be fined up to £4,000 (unless the property is a listed building or holiday accommodation rented out for less than 4 months a year or let under a licence to occupy).

On the upside, the availability of Buy to Let mortgages is at it’s highest for some time with loans available up to 85% of the property value and five year fixed rate deals, with only three year redemption penalties recently being launched.  Terms and conditions obviously apply.

Taking in to account all of the above, it is more important than ever, to seek specialist Buy to Let mortgage advice along with the relevant tax advice from a property tax adviser.  This really is an area you can’t afford to get wrong as it could be very costly to rectify later on. 

Which type of property valuation is right for you?

On every property, the lender will require to know that they are lending money on a suitable property.  This will entail a valuation and normally a surveyor will vist the subject property.  This is a fairly basic valuation and is for the lender, paid for by the borrower, and it should not be relied upon as a guarantee that the property is sound and fit for purpose.  It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes.  They have no obligation to tell you what is in the report or give you a copy! 

In some cases, they will not actually visit.  This is because they can often access detailed information electronically, normally called an Automated Valuation Model (AVM), where a mathematical system calculates the property’s value based on a number of comparable properties and other in-depth calculations.  

Therefore, you should always consider the benefit of an independent survey on the property you are purchasing to ensure that any and all defects are noted before signing contracts. There are two main types of survey available, aside from the standard lender mortgage valuation.

Homebuyer Report - a standard format set out by the Royal Institution of Chartered Surveyors (RICS). This will not focus on every aspect of the property as a building survey will (below), but will advise on urgent matters needing attention. It may advise if items (a leaky roof for example) might have an adverse effect on the value of the property, or if further investigations are required.

A Building Survey – an in-depth survey for all properties: listed buildings: buildings that have had extensive alterations, or of an unusual construction. The surveyor will examine all accessible parts of the property and advise on technical information: the condition relative to age: further special investigations required, and provide extensive information on major or minor defects.

Both will comment on whether the agreed asking price is reasonable, whether it reflects the condition of the property and should give you peace of mind whilst making the biggest purchase of your life!

Finally, I’m always looking for content ideas.  So, if you have any burning questions or items you would like to see, please don’t be shy to ask!  You can email me at dale@impactsf.co.uk or call me on the number above.

Only 20% of homeowners take a homebuyer survey when purchasing a property.

Research from Legal & General has shown that only 20% of homeowners take out a home buying survey when purchasing a property.  This is despite home buyers on average spending £5,750 on unforeseen repairs when they move into their new home!

So, to recap on the options:

Valuations on properties to be mortgaged come in various guises.  Every mortgage lender will require a valuation on the property to ensure the property is suitable security for their purposes. This is a fairly basic valuation and is for the lender, paid for by the borrower, and it should not be relied upon as a guarantee that the property is sound and fit for purpose.  It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes.  They have no obligation to tell you what is in the report, or give you a copy! 

In some cases, they will not actually visit.  This is because they can often access detailed information electronically, normally called an Automated Valuation Model (AVM), where a mathematical system calculates the property’s value based on a number of comparable properties and other in-depth calculations.  

Therefore, you should always consider the benefit of an independent survey on the property you are purchasing to ensure that any and all defects are noted before signing contracts. There are two main types of survey available, aside from the standard lender mortgage valuation.

Homebuyer Report - a standard format set out by the Royal Institution of Chartered Surveyors (RICS). This will not focus on every aspect of the property as a building survey will (below), but will advise on urgent matters needing attention. It may advise if items (a leaky roof for example) might have an adverse effect on the value of the property, or if further investigations are required.

A Building Survey – an in-depth survey for all properties: listed buildings: buildings that have had extensive alterations, or of an unusual construction. The surveyor will examine all accessible parts of the property and advise on technical information: the condition relative to age: further special investigations required, and provide extensive information on major or minor defects.

Both will comment on whether the agreed asking price is reasonable, whether it reflects the condition of the property and should give you peace of mind whilst making the biggest purchase of your life!

Finally, I’m always looking for content ideas.  So, if you have any burning questions or items you would like to see, please don’t be shy to ask!  You can email me at dale@atomltd.co.uk or call me on the number above.  Have a great week!

A survey is for the lender, not you!

Some weeks there is just too much news to take in and it can be difficult to assimilate and decide which to report on.  Then there are quiet weeks where nothing much seems to happen.  This week has been the latter and the mortgage market has been quieter than normal.  So, what to discuss?  Surveys!

Valuations on properties to be mortgaged come in various guises.  Every mortgage lender will require a valuation on the property to ensure the property is suitable security for their purposes.  Although, in some cases, they will not actually visit.  This is because they can often access detailed information electronically, normally called an  Automated Valuation Model (AVM).  Of course, this can prompt a borrower, who has paid a fee, to question the reasonableness of this method.  In fairness to the lenders, it is a tried and tested system and rarely proves incorrect.  They have expenses regardless of the visit and this system does have the effect of keeping prices down. 

Remember that this, fairly basic valuation is for the lender, paid for by the borrower, and it should not be relied upon as a guarantee that the property is sound and fit for purpose.  It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes.  They have no obligation to tell you what is in the report, or give you a copy!  Therefore you should always consider the benefit of an independent survey on the property you are purchasing to ensure that any and all defects are noted before signing contracts. There are two main types of survey available, aside from the mortgage valuation.

Homebuyer Report - a standard format set out by the Royal Institution of Chartered Surveyors (RICS). This will not focus on every aspect of the property as a building survey will (below), but will advise on urgent matters needing attention. It may advise if items (a leaky roof for example) might have an adverse affect on the value of the property, or if further investigations are required.

A Building Survey – an in-depth survey for all properties: listed buildings: buildings that have had extensive alterations, or of an unusual construction. The surveyor will examine all accessible parts of the property and advise on technical information: the condition relative to age: further special investigations required, and provide extensive information on major or minor defects.

Both will comment on whether the agreed asking price is reasonable, whether it reflects the condition of the property and should give you peace of mind whilst making the biggest purchase of your life! 

SWAP rates decrease, delays still wide spread and Shared Ownership in demand.

We've seen a large increase in enquiries for customers looking at Shared Ownership schemes.  Shared Ownership schemes are provided in conjunction with housing associations. You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association. You usually have the opportunity to purchase a bigger share of the property later on (known as ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.  There are many schemes available and a good supply of properties, so do review all the options available.   By buying a smaller share, it does give an opportunity to obtain a property for many who may struggle otherwise with normal lending criteria.  

Delays are still wide spread across the market.  An existing customer phoned their lenders mortgage sales team and was advised that they could not have a discussion about a new mortgage for over two weeks!  Another customer requested a homebuyers valuation on their property (more investigative than a standard mortgage valuation) and although the surveyor could carry out the normal mortgage valuation within days, the enhanced homebuyers report could not be carried out for a month!!  You need to be aware of these delays as many property sales are sold subject to contract and this normally carries a 28 day exchange period. 

Finally, we have seen some surprising product interest rate decreases over the last few days.  SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have reduced over the last week or so, and as such some lenders have passed on the reduction through their interest rate offerings.   This is great going in to the holiday period and should encourage anyone considering reviewing mortgage options in the not too distant future, to maybe consider it sooner as these may not remain low for too long.  Always seek advice! 

A lenders mortgage valuation may not go far enough.

Mystique surrounds mortgage and property valuations, so, firstly, here is a brief overview on the options…….

Lenders require a valuation to be carried out, by their approved valuers, on every mortgage. This report is for the lender only and should not be relied upon when purchasing a property, as it does not go far enough. It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes. They have no obligation to tell you what is in the report, or give you a copy! Therefore you should always consider the benefit of an independent survey on the property you are purchasing to ensure all defects are noted before signing contracts. There are two main types of survey available, aside from the mortgage valuation.

A Building Survey – an in-depth survey for all properties built pre-1900: listed buildings: buildings that have had extensive alterations, or of an unusual construction. The surveyor will examine all accessible parts of the property and advise on technical information: the condition relative to age: further special investigations required, and provide extensive information on major or minor defects.

Homebuyer Report - a standard format set out by RICS (Royal Institution of Chartered Surveyors). This will not focus on every aspect of the property as will a building survey, but will advise on urgent matters needing attention. It may advise if items might have an adverse affect on the value of the property.

Both will comment on whether the agreed asking price is reasonable and whether it reflects the condition of the property. AToM can recommend local providers for either service.

Lender news includes: Northern Rock’s posting losses of £257m for 2009, a vast improvement from the £1.4bn losses for 2008.

‘Abbey for Intermediaries’ have reduced rates by up to 0.4% on four year fixed products and now have some very attractive offerings. These are only available through intermediaries, so talk to your local independent mortgage advisers!

Finally, Microbiz takes place at the Drill Hall, Denne Road tomorrow (13th) and is a must for any small business or start up. A treasure-trove of information and it’s free! AToM will be there. Come and see us.