How Will The New Buy To Let Tax Rules Affect Your Buy To Let Portfolio?
New Buy To Let Affordability Rules come into force on January 1st 2017. Set by the Prudential Regulation Authority, they will impose new minimum affordability thresholds on Buy To Let lenders. These thresholds are designed to ensure that you can continue to afford the mortgage payment and make a 25% profit should rates rise to 5.5%.
This means those looking to add to their portfolio or looking to switch a Buy To Let mortgage to another lender may find it difficult unless their rental yield can meet the new rules.
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Who Will Be Affected by New Buy To Let Affordability Rules?
How will the new Buy To Let affordability rules affect you? I feel that this will more than likely affect landlords who own higher value property, as these usually yield a lower return in percentage terms despite offer higher monetary returns. If you own higher value property with a relatively large mortgage on it, you may find that the rental income fails the new rules.
Some banks do already stress test at the new rate so you may not see any changes unless and may not be affected. It is possible though that those banks already meeting the new rules choose to make obtaining a mortgage a little more difficult, re-inforcing the fact that they are lending responsibly.
A few lenders do currently offer a very attractive stress test, choosing much lower rates to check affordability, it will be these lenders who will need to fall in line and it will be their clients who will feel the pain most.
What Should You Do?
If you haven’t already, you should put together a portfolio list and review the details of each of your property such as mortgage amount, outstanding mortgage balance and rental income, apply the new calculation below to check where each of your properties fall within the new Buy To Let affordability rules, or simply download our free portfolio tracker below.
Download our Portfolio Tracker which does the calculations for you or use the following calculation, please note some lender apply a higher stress test than this;
Call us on 01233 512012, we can check your portfolio for you and if neccessary provide a tailored report on what you can do to you don’t get caught out.
Download and use our free Portfolio Tracker to keep on top of your portfolio value, rental income, mortgage end dates and much more. The tracker allows you to filter by Mortgage Lender and other values.