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Whether you’re a seasoned investor, or exploring the option of becoming a landlord for the first-time, you may already be aware that a raft of reforms on the buy to let sector in recent months have impacted the factors to consider first?

These may affect your decision to invest in buy to let property, but we can help offer tailored advice, depending on your current circumstances.

What’s changed?

Landlords must now register with either The Property Ombudsman (in Scotland it is The Property Ombudsman Scotland, a separate legal body) or The Property Redress Scheme, to provide an independent arbiter who can rule in disputes between landlords and tenants (or letting agents and their customers).

Any property to be leased after April 2018 must also have a minimum energy efficiency rating of E. (Pre-existing tenancies have until 2020 to comply.) Providing false information on this could lead to a fine of up to £5000, so if you’re looking now be sure to clarify the property’s energy rating if you are interested in buying it.

Local Authority registration

Many local authorities now require you to register as a landlord, even if you’re an ex-pat seeking lending to let a property in the UK while you are resident overseas. Around 300 Local Authorities across the UK either have some form of scheme in place already or are currently consulting on the introduction of a landlord registration scheme. Check your local council’s website to see if this affects you.

There are also proposals to introduce inspections on rented properties every three years. While this is not yet confirmed, bear it in mind when looking at the overall condition of any property you’re considering making an offer on.

Tax changes

As a landlord, you can still offset 50% of your mortgage interest for tax relief – in the tax year starting on 5 April 2019. But be aware that this allowance will disappear completely in 2020. So, it will pay you to do your sums carefully if buying in the next year.

In addition, for all options in the Buy to Let market, we recommend that you seek specialist advice from an authorised tax advisor before making any firm commitments: The Lending Channel are not authorised as tax advisors.

Lender requirements

Against all this, lenders are also imposing their own tougher restrictions on portfolio mortgages. If you are adding a fourth property (or above) to your rental portfolio, then you will now need to show full financial information for each existing property when applying for new finance. This means that if you’re already heavily mortgaged with your existing portfolio, a lender might now refuse to advance any additional loan.

Case Study

Client need - An experienced property investor owned one property in a limited company structure, in addition to a further six, which were mainly HMOs in Edinburgh, that were owned in their own name. For various reasons they wanted to move all six into the company, largely to streamline administration.

In having six properties to transact, they were aware they could take advantage of relief from the 3% Additional Dwelling Supplement on LBTT. One of the properties was a current main residence, and with the intention of turning it too into a buy to let this added a further element that provided an issue for some lenders.

Solution – Bank of Scotland funded a £1.2m Partially Amortised Loan, at a sub 3% pay rate across six of the properties.

Client comment

“The Lending Channel appraised the complex detail of my proposition and didn’t shy away from the challenge. Working within limited company lending, HMO lending in Scotland – with a ‘Let to Buy’ element – was not an easy proposition during late 2017/early 2018. The Lending Channel excelled in listening to my requirements, took on board my competing parameters of flexibility, price and capital raised, and delivered the best solution within what the market could offer at the time. Hats off to the dedication and patience of all the team for helping to deliver a proposition that has helped my business expand.” MP Edinburgh.

Portfolio Lending

We support many professional landlords and specialise in large, multi-property transactions, where portfolios of more than 40 properties are not uncommon. This category applies to anyone with a portfolio of four or more properties.

Limited Company Lending

This route is available for landlords who either want to acquire new property by setting up a new Special Purpose Vehicle (SPV), or those who want to transfer properties currently under their own name into a new company.

Transferring six or more properties into a limited company will allow clients to get relief from the 3% Additional Dwelling Supplement charge.

HMO Lending

Landlords active in the House of Multiple Occupation (HMO) market – commonly used for student accommodation – can obtain specialist deals.

Short term Holiday Lets

There are tax advantages to this option, which is making it increasingly popular as an alternative to traditional buy to let: you can offset the interest you will pay on a mortgage for a holiday lodge against its rental income.

You need a specific mortgage for the short-term holiday letting market, and there are fewer lenders offering this mortgage product. Typically, they’ll impose tougher restrictions on the loan to value they’ll advance.

If you want to explore any of these options further, call one of our specialist advisors today on 01738 583008 or contact us and we’ll call you back.

The Lending Channel are a broker not a lender.

The Lending Channel are members of the National Association of Commercial Finance Brokers (NACFB).
2/1 King James VI Business Centre, Friarton Road, Perth, PH2 8DY
Tel: 01738 583008 | Fax: 01738 500402

The Lending Channel are authorised and regulated by the Financial Conduct Authority.
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