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How to borrow more from my buy to let property if I am a higher rate tax payer?


How to borrow more from my buy to let property if I am a higher rate tax payer?
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Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin24 Sep 2019
    

Calling all landlords! If you own multiple buy to let properties Top Slicing may be for you.

The Bank of England’s Prudential Regulation Authority (PRA) initiated more stringent rules for landlords who owned four or more buy-to-let properties. Lenders have had to amend there ways or disregard the business completely. Top Slicing mortgages have been adopted by some lenders, Top Slicing allows landlords to use there personal and or other external income to subsidise short falls in their low rent yielding properties.
When a Landlord applies for new lending for a new property, the ‘lender’ must now take all the properties in the landlords portfolio into consideration. Monthly rentals yields should exceed more then 125% of the mortgage payments, to secure lending. Some lenders have also chosen to increase this to a hefty 145%. There is a huge amount of competition in the buy-to-let market and the banks and building societies are interpreting the PRA’s new rules differently.

As a result, a selection of lenders offer more attractive rental calculations when landlords lock into a longer term fixed rates.

If a property generates £1,750 rental income per month, it may be possible to secure larger loans through some specialist lenders.

If you were to apply for one of Santander’s buy-to-let mortgages, a rental calculation of 145 at 5.5% would apply. With £1,750 rent each month this would mean the bank would lend around £263,322.

Other lenders may well offer much more generous buy-to-let loan sizes, for example, Accord Mortgages could offer up to £311,111 and Fleet Mortgages could provide up to £336,000. Also, Newcastle for Intermediaries may lend up to £362,068 and Paragon Mortgages could lend up to £420,000 (to basic tax rate payers).

There are a handful with lower rental calculations but the latest lender to launch is LendInvest. Better known as a peer to peer investment platform, the lending side of the business is now offering buy to let mortgages in addition to short term and development finance. For those with a 40% deposit or equity, the two-year fixed rate is 3.69%, while the five year rate is 3.99%.

The maximum loan to value is 80% with rates starting at 4.49% for a two-year and 4.79% for a five year fix. It’s pitching itself at professional landlords mainly but, depending on your circumstances, its rental income ratio calculations start from as low as 125%. Similarly, if you’re looking to do a pound for pound remortgage, LendInvest will adopt the stress rate of a basic-rate limited company borrower – quite unusual in the market. Taking some of these figures into consideration means, some landlords will have a hard time trying to secure lending. Top Slicing takes a landlords personal income into consideration meaning that they can bridge shortfalls in the affordability of the lending.

Contact us now to discuss your personal options, Revolution Finance Brokers specialise in commercial and residential finance in Essex, Kent, London and Hertfordshire.

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.