Buy-to-Let landlords are being widely recommended to remortgage their existing portfolios as the UK government tightens its grip on affordability tests and creates tougher lending rules which will make arranging portfolios and finances more difficult. What do you need to know about the government’s new rules for BTL landlords?
The marketplace will become more complex
The new measures for the tougher BTL criteria come into effect in September – and the Bank of England’s Prudential Regulation Authority is cooling the BTL market in an attempt to free up properties for first time buyers. Great for buyers, but landlords have found that government intervention has made securing profits on rentals to become a struggle.
The good news is that the average fixed BTL rate is down to 3.34% on last August, but this comes at an organisational cost: landlords must now provide additional evidence for their mortgage applications. Essentially, you have to go a few extra steps further to prove you can afford to finance another mortgage.
A “portfolio landlord” is now classified as a borrower who has four or more mortgaged rental properties. Be wary of the number of properties you rent and the extra red tape you may now have to pass through if you want to increase your portfolio.
Remortgage now for the greatest benefit
Why remortgage when the rules are becoming stricter? Well, it may seem redundant to remortgage now, but act quickly and it could reduce the impact of the upcoming changes as well as the previous changes to BTL tax relief for landlords that occurred back in April. These changes can easily eat away at potential profits, so remortgaging, while a pain, will inevitably mean you can snag a better rate whilst rates are still relatively low for landlords: with the right loan-to-value ratio, landlords can still go way under 2% rates for a remortgage. This could also mean you keep your rent competitive and not outpace your local area. Many landlords have raised rents to combat the change in taxation and the new BTL criteria, but this has the added risk of pricing tenants out of your property for good.
Consider hiring a letting agent
Some landlords find themselves building portfolios to escape the office grind, only to find that they spend a lot of their time micro-managing their properties. Working with an agent or agency means you can pass the day-to-day running of your property on to someone else, paying a small fee for the convenience but also having that extra time to build – and profit from – your own property portfolio. They’ll focus on marketing your property and filling it with a suitable tenant as quickly as possible. iLet is one such Letting Agent, with a 24/7 enquiry line, lettings progression team and years of experience in their Northampton office. Call us today to find out how we can help you get the most out of your property portfolio!