Mon 19 Nov 2018
Lee Whitelock, Director MNAEA
Landlords have faced a remortgaging crunch this year.
It has been two years since the introduction of the extra 3% stamp duty surcharge on buy-to-let properties and second homes, which encouraged landlords to rush to buy before the extra surcharge took effect. Now, as landlord deals are coming to an end, tighter lending rules limit the options for those who wish to refinance.
This makes landlord remortgaging a little more of a struggle. If you are in this position, you are no doubt wondering what options are available to you. Below, we’ve highlighted the remortgaging options for landlords.
Issues Affecting Buy-to-Let Landlords
Don't bury your head in the sand and get caught out by recent rules and regulations. If you are aware of what you are up against, you can stay on top of your investments.
Stricter Lending Criteria – It has become increasingly difficult for landlords to find financing. For some, the only option may be a product transfer.
Tax Relief – The amount you can claim back as tax relief has been reduced and will continue to be reduced over the next few years.
Stress-Testing Rules – Landlords must now generate more rental income so that mortgage costs will be covered, even if interest rates go up.
Portfolio Landlords – Those with four or more properties will have to undergo rigorous checks if they wish to obtain finance for a new property. Your entire portfolio will be assessed if you want to remortgage or finance a new buy-to-let property.
Equity release mortgages
If you hope to avoid selling your buy-to-let properties, then you may wish to consider an equity release mortgage. This will allow you to release cash from your rental properties. More landlords have been releasing equity to fund renovations, too. This is a viable alternative to trying to get financing for new properties. According to Which?, in the past year London landlords have released on average £35,470 in equity to fund property renovations and improvements. This in turn can help boost rents.
Top tips for landlord remortgaging
Here are some pointers to help you beat the high landlord remortgage costs:
1. Get your affairs in order
Due to the extensive checks you will be required to undergo, remortgaging now means a whole lot of paperwork. Unless your well-informed in this area, you should seek assistance to make sure your tax affairs are in order.
2. Make sure your properties are performing well
If any property within your portfolio is performing poorly you may not be able to obtain financing. This is again because of the in-depth checks to make sure you can afford remortgage payments
3. Consider selling up
What is your current level of property risk? With all the new rules and expenses, such as tax relief changes, it may be better to offload properties. Investing is always a risk. You just need to know whether you have the right level of property risk at this point. If you are a landlord in Bermondsey, London Bridge, Borough, Shad Thames or the surrounding areas, we can assist you in asset management. This includes the acquisition and disposal of rental properties.
We can guide you every step of the way. For more information, contact us today on 020 3318 5525 or visit our contact us page.