2017 has been a tumultuous year for landlords. In April the amount of mortgage interest you can offset against your rental income dropped to 75% of the interest charged; the Chancellor announced that you could no longer offset all wear and tear costs of furnished properties against profits and then on the 30th September rules were changed for everyone with more than four properties in their portfolio.
And it’s not stopping there, there are currently 15 government consultations underway that may affect landlords in some way. 2018 will see the amount of mortgage interest you can offset drop still further, while in April, every property will need a minimum energy performance rating of E on an Energy Performance Certificate (EPC).
Many people are still getting their heads around these latest changes – lenders as well as landlords. Fortunately, experienced buy-to-let brokers have been staying on top of the rules, and also on top of who is doing what and how it might affect the unsuspecting landlord. A good broker will take away the worry guiding you the landlord, through everything you need to do.
The portfolio landlord rules in particular have changed the shape of the market. Some lenders who offered a lot of buy-to-let mortgages have pulled out of the portfolio landlord market, only lending to people with four or fewer properties, while others, sometimes lesser known lenders, have seen it as an opportunity and are making it as easy as possible for landlords.
The challenge is that, if you do have more than four properties, when you come to remortgage even one of them, or if you go to buy another, the lender now needs to look at the value and risk of every single property that you own. If there is even one property in the background that doesn’t fit the risk criteria then you stand a risk of not getting the mortgage - even though that’s not the property you want the mortgage on.
As a result, it has become essential to list every property that you have, with its valuation and the amount of money you have borrowed against it. It is important the valuations are up to date and the rental income is correct so that you portray the portfolio in its best possible light. The good news is that when this is done once and the properties pass the lender’s stress test, then each mortgage after that will be easier as long as things stay broadly the same.
For this reason, it can be worth working with a mortgage adviser early, to make sure that all of your properties are in the order that they need to be - even before you look to buy that additional house or take out that remortgage. This means making sure that no property is too highly leveraged, that you know what repairs you may need to do on each property and have accounted for them. It is also important to make sure that each property has the right energy performance rating and an up-to-date certificate that reflects this, before the 1st April 2018 comes round.
No landlord wants to find that they miss out on snapping up a new property because one of their other houses isn’t in order. By making it your New Year’s Resolution to work with a broker now, when you do want to make that next transaction, the refinance part will go through quickly and as smoothly as possible.