Whether you are an experienced landlord or a a first timer buyer looking to save towards your pension, you are now one of the many people getting involved in the ever growing buy to let industry. Despite the move towards people entering this industry, the process can appear daunting and there are many factors, which you may have overlooked. It is our job to ensure that you enter into this investment with your eyes open.
Firstly, you must consider the type of mortgage you will need. A buy to let mortgage is a lot more onerous than a standard residential mortgage. Most banks will implement their own specific standards, however it is widely accepted that you must have at least a 25% deposit for the property. It is not possible to get a 90% mortgage.
Another key difference is the way in which the mortgage is assessed, with a buy to let mortgage the amount you can borrow is not based on your own income but is often based on the expected rental income from the property.
There have been huge changes in the world of buy to let investments in recent years. The slashing of the tax relief when coupled with the Stamp Duty surcharge have left many landlords wondering whether buy to let properties are the investment they once were. It is our job to ensure that you know the tax implications.
Prior to the April 2016 there was no stamp duty payable on any property under £125,000. However, under the new Tax regime which came into force in April 2016, not only is stamp duty payable on every buy to let property but there is a surcharge rate payable. Therefore while a person purchasing a residential property for £150,000 would have to pay 2% stamp duty, where a person is purchasing a buy to let property for £150,000 they would have to pay 5% stamp duty.
While it may seem odd discussing selling a house as you are buying it, capital gains tax is something you must consider if you are planning on selling this property on for a profit in a few years. When you buy a property which is not your primary residence, you are required to pay capital gains tax on the profit you make when selling the property on.
The buy to let industry can be volatile and if the past decade is anything to go by there is no guarantee that the market will continue to grow. However, what you can be sure of is that our team will guide you through the entire process and ensure that this transaction runs as smoothly as possible.
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