Landlords earning less than £43k a year escape tax crackdown on risky mortgages
11-13-2016
- Landlords earning less than £43k a year escape tax crackdown on risky mortgages
- Nation's biggest buy-to-let mortgage lender won't reduce amount it lends to basic-rate taxpayers
Higher-rate taxpayers will have to collect up to 145% of monthly repayments in rent by the end of the year
By Paul Thomas For The Daily Mail
Landlords who earn less than £43,000 a year have been spared a crackdown on risky loans.
Britain's biggest buy-to-let mortgage lender, BM Solutions, says it won't be reducing the amount it will lend to basic-rate taxpayers.
By contrast, higher-rate taxpayers may have to collect higher rents from their tenants or save for a bigger deposit to get the loan they want.
Britain's biggest buy- to-let mortgage lender, BM Solutions, says it won't be reducing the amount it will lend to basic-rate taxpayers
At present, BM customers must ensure their rent covers at least 125 per cent of their monthly mortgage payments. So you would need rent of £625 a month for a £500-a-month mortgage.
By the end of the year, BM will insist higher-rate taxpayers collect up to 145 per cent of their monthly repayments in rent — or £725 a month on that £500-a-month mortgage.
The exact amount will depend on your earnings. Basic-rate taxpayers will still only need to collect 125 per cent.
The clampdown on higher-rate payers comes as landlords prepare to lose a generous tax perk.
From April, the amount of tax relief landlords can claim on their mortgage interest will be cut from a maximum 45 per cent to just 20 per cent.
The changes will be phased in over four years.
Higher-rate taxpayers will be hit hardest and many landlords will see profits shrink dramatically.
Lenders such as The Mortgage Works, Santander, and Barclays require rent equalling at least 145 per cent of the monthly home loan bill.
Andrew Montlake, of broker Coreco, says: 'Landlords need to wake up to the fact that they may not be able to borrow the amounts they may have been able to in the past.'