They know the industry

Mortgage criteria has tightened massively over the past few years, with the Mortgage Market Review of 2015 being the last wide-ranging development. That was designed to ensure borrowers can prove affordability, even in the event of a rate rise, and those extra checks have created additional barriers to lending.

 

Buy to Let property has come under the microscope and been the subject of a review by the Prudential Regulation Authority (PRA). The affordability aspect of Buy to Let for Professional Landlords, those owning 4 or more properties, and the rental stress tests employed by lenders when assessing individual cases has been the main-focus of their intervention. The days of calculating the maximum mortgage based on a notional interest rate of 5%, stressed at 125% of this notional mortgage payment, are gone.

 

What we now have is a wide variation of criteria, in use by Banks, Building Societies and a range of new ‘challenger’ banks, being applied to different categories of borrowers who may own up to 3 properties, four or more properties, or whether they are an individual or a company!

 

When assessing an individual’s affordability some lender’s underwriting is now appearing with the option to top-slice personal income, to subsidise any perceived rental shortfall, having run the affordability slide rule over the case.

 

One of the main catalysts for the PRA’s intervention was the changing tax regime imposed in the March 2016 budget. Some of the bigger items were:

1. The removal of 10% tax relief for depreciation on fittings and furniture without the need to provide substantiation.
2. The imposition of paying tax on dividends from a threshold of £5,000 as opposed to previously from when the higher tax rate threshold was reached.
3. The removal of tax relief on mortgage interest, to be offset against rent collected, at the higher, and additional, rates of tax relief when property is owned in personal names. The removal of this relief to be on a sliding scale from 100% relief to 0% relief, on higher rate earners, between 2017 and 2021.
4. From 2021 only 20%, or the basic rate of tax, will be deemed an allowable deduction from your gross income in assessing your total taxable income.
5. There will be a requirement to assess the gross rent, less agreed specific property related deductions, as part of an individual’s income from all sources which, for many people, may push them into the higher rate tax band.

 

The ‘long and the short’ of this, is that there has never been a more relevant time for everyone to engage, and work with, a mortgage broker to ensure that they are getting access to the full range of options in the market, alongside the right advice of the most appropriate borrowing, and repayment, vehicle.

 

You’re protected

An important thing to understand is that when you receive mortgage advice, your mortgage broker has a duty of care to you. They must recommend a suitable mortgage and will justify why the mortgage they have chosen is right for you. If their advice is not up to scratch, you can complain and be compensated.

 

A mortgage broker is qualified

There’s an awful lot to think about when choosing the right mortgage. It’s not as simple as just opting for the cheapest fixed or tracker rate mortgage you can find!
A broker is on your side!

 

It’s not just about the mortgage

Don’t be put off by a fee
Mortgage advisors, like Accountants or Solicitors, are professionals and their advice, tailored to your situation, is a service. Like all professional’s mortgage brokers charge fees for their services, but often these are ‘success based’ fees once they have delivered you the guarantee of funds through a mortgage offer.