8am - 9pm 7 days a week | Call 0203 651 5053 | sales@belgraviapropertyfinance.co.uk

Category: Buy To Let Mortgages

buy to let

Buy to let changes from Aldermore – significant

The buy to let market has experienced the implementation of significant tax related changes. The changes have created  problems mostly for individual landlords. It has also reduced the introduction of new speculative landlords to the property market. Individuals are now discouraged from developing large property portfolios unless they form a limited company to enjoy the tax relief available.

Company landlords benefit from the buy to let changes

The market has been waiting for a change to provide additional relief to both developers and buy to let landlords. Aldermore the specialist buy to let financiers have responded to the need by introducing new, more flexible mortgage products. From the 23rd April company landlords have been able to access the company’s more flexible morgae products. These were previously only available to individual landlords.

The bank has reduced its early settlement fees. Furthermore it is now offering remortgage products that dont bring legal, product or valuation fees with them. This fee structure makes a difference that will offer an impact to all their clients. Additionally, there will now be reduced rates to mortgages for multi unit freehold properties and HMOs.

Competitive rates

Rates start at 4.38% for the HMO and multi unit freehold properties. This is for a two year fixed rate products and and 75% loan to value. They have also reduced term variable rates across the range of their products. Some rates start as low as 3.28%. Their new remortgage products also enjoy no product, valuation or legal fees either.

Aldermore are also rewarding their existing customers. Multi property mortgages with discounted rates are available for those that have been loyal customers. Clearly it pays to stay. New customers that submit a second or subsequent application or those seeking a remortgage will enjoy these products too. They have also made it easier for landlords that have only recently started trading. Only one years accounts will now be necessary for those that are self employed. a reduction in early repayment charges makes the offer even more attractive.

Aldermores Commercial Director of mortages – Charles McDowell says “The sector has experienced significant change recently. So we regularly review our products to ensure we continue to support a broad range of customers. No matter how big or small their portfolio is”

Technology changes improve accessibility

Their own research has indicated that 41% of landlords intend to increase their portfolio over the next year. Interestingly 15% of those that are not intending to expand, will still seek to remortgage some their properties. Aldermore clearly understand how making changes to their products not only supports the industry but their customer base too. Focusing not only on financial accessibility but on technology too, customers can access their mortgages from their mobile phones too.

From April the 23rd brokers have been able to access their portal, get a quote or submit a deision in principle from any device. This facilitates quicker decision making and access to the finance in a market where circumstances change really quickly.



Auction Finance – Solutions For Quick Property Purchase

Property developers attend auctions to weed out some of the best investment opportunities available. Auctions, however, present a multitude of complexities that do not come with mainstream property purchases.

Financing an auction property can bring with it headaches and technical problems not seen in traditional property purchase scenarios. Auction finance is specifically geared to deal with these issues.


Auction Finance – What’s the Difference?

Most commonly, auction finance is a form of bridging finance. It allows the property purchaser some breathing space to get more traditional forms of finance in place.

In some cases, the finance must be completed quickly to secure the auction sale. The loans are usually secured against the property that has been purchased or other property that the developer already owns. The idea is to make the funding available as quickly as possible to allow completion.

Funding can be confirmed within hours. This is in complete contrast to the days or weeks that financing can take in traditional situations. The process is less onerous, and lenders will be more interested in the security available.

Auction finance sources will also lend to individuals who are self-employed as well as limited liability partnerships, limited companies, partnerships, sole traders, and employed individuals. Their scope for consideration is far wider than the average high street bank.


Not Just A Bridging Loan

Auction finance does not always involve bridging loans, however. When an investor or property developer sees a property they would like to purchase at auction, they can prepare financing ahead of time.

Mortgages and buy-to-let mortgages can be agreed in principle well before the hammer falls. This places the bidder in a position where they will know where their funding limits lie. Situations where the bidder knows their maximum bidding threshold places them in a position of strength.

Auction sales move very quickly. Especially for those new to them, it can be nerve-wracking and overwhelming. When the hammer drops, 10 percent of the price has to be paid up front.

Under most circumstances, the balances will be settled within 28 days. It is usually the 28 day period that necessitates auction finance in the form of a bridging loan.

If a mortgage has been agreed in principle and where it is being secured on either the purchased property or other assets, it is on rare occasions possible to finance immediately using a mortgage agreement.

To achieve this, you may need an experienced advisor broker. Your broker will know which finance companies work the fastest to ensure completion on time while still meeting all the requisite legal requirements.


Commercial Property

Auction finance is not only available for residential property. A business may want to extend its premises or buy new premises at a different location. If it is expanding, there may be good reason to buy additional properties.

Commercial property financing is also available under auction finance and is a good avenue to purchase value for money property. In the same way that individuals may want to seek a mortgage, it is probable that a commercial purchase at auction will require both bridging finance and a commercial mortgage to obtain the property.

If you are an individual seeking to buy a second home or a business purchaser for new manufacturing premises, good financing advice will be crucial. Established and reputable brokers will be well networked and able to find you a good deal.

Whether you wish to use a traditional lender or will need to find a private lender, Belgravia Property will be able to guide you along the way. For confidential unbiased advice, contact our London office.


Limited Company Buy to Let Mortgages in Scotland

 Multiple Changes in Regulations

The recent changes in taxation surrounding buy-to-let property have really set the cat amongst the pigeons, mostly because they have appeared to penalise individuals and not limited companies. Of course, it’s far too complex to apply a blanket statement on this issue, but more recently a whole range of new regulations are also about to come into force.

From the 1st October 2017, underwriting for portfolio landlords will require a new and specialised approach when applying for mortgages. According to the Prudential Regulation Authority, a landlord is a portfolio landlord if they have four or more mortgaged buy-to-let properties, whether as an individual or as a limited company.

The Prudential Regulation Authority is a part of the bank of England that regulates and supervises approximately 1500 banks, building societies, investment firms, insurers and credit unions. Apart from facilitating competition, the PRA also exists to ensure that all parties are protected within the regulatory provisions.


Scottish Law is Different

Deciding to purchase a buy-to-let property in Scotland can complicate things a little further for both the new landlord and the established portfolio landlord, and depending on the status of the landlord (individual or limited company), obtaining a mortgage is likely to require some specialist help.

Because Scottish property law is different to the law elsewhere in the United Kingdom, you are likely to find that you’re going to need some help finding the right source of funding. In Scotland, you may discover that buying a property seems to be done in reverse when compared to the rest of the country.

Furthermore, in Scotland, the surveys and valuations are taken out at the expense of the purchaser before an offer is made. An offer in Scotland is called a missive. This may seem to be a rather risky business for a potential buyer when paying for a survey when they can’t be 100% sure that they’re going to make an offer on the property.

The advantage of this is clear though. Only a serious buyer will start the process of valuations and surveys, and the likelihood of gazumping is dramatically reduced as a consequence.

The other concern is that after incurring the expense, there is a risk that the owner may turn down the offer.


Buy-To-Let Financing Systems Fail Scottish Landlords

It has become clear that buy-to-let lenders have been holding their cards close to their chest with changes taking place from all sides. Scottish property already has a reputation for the difficulty experienced in obtaining buy-to-let mortgages, landlords are not holding their breath to see what happens when the new regulations kick in later this year. As it is, many buy-to-let lenders do not have systems in place that are structured to cope with the buy-to-let market and purchasing process in Scotland.

For those in the business of buying to invest and then rent to generate income, the buy-to-let mortgage market can become a minefield. It is best to find an experienced and knowledgeable financial advisor and mortgage broker. These professionals must stay on top of the changes in both property regulations and taxation laws.


New Tax Rules Offset by New PRA Regulations

Experienced portfolio landlords express frustration at the continually changing fiscal landscape in which they must run their businesses. They find it worth their while to use the services of financial advisors that can weigh up their situation particularly as registered limited companies.

For many of them, the reduced effects of the new tax rules on buy-to-let mortgages for corporate entities seem to have been completely negated by the difficulties that the new Prudential regulation rules bear upon them.

It seems that both individual landlords and limited company landlords have to face similar problems, just simply in reverse. The biggest hurdles are not only finding a buy-to-let lender, but also finding an affordable product that will make the lending process worthwhile, enabling even the corporate landlord to continue to generate an income from their portfolio.

There are four very active lenders in Scotland who finance this area of property purchasing specifically to corporate landlords reliably. They are Keystone Property Finance, Shawbrook Bank, Precise, and Aldermore Bank. Belgravia Property Finance also work with dozens of other lenders, including private banks for HNW buy-to-let mortgages in Scotland.

These lenders are particularly good when seeking funding for complex property situations such as multiple units and HMOs.

It is ill-advised to attempt to purchase a property in Scotland as a corporate landlord on your own. Our financial advisors and property finance brokers are the best people to speak to. Speak to us first and if you’re in the process of exploring Scottish property call us now.


SPV Limited Company Buy To Let

When landlords start out they will come across the term SPV Limited Company Buy-to-Let, which means Special Purpose Vehicle, a limited company for buy to let. There are multiple options in terms of how they can trade. Some will choose to operate as individuals, others as limited companies, and others as SPVs.


Difference Between an SPV and Limited Company

Before deciding whether an SPV is the suitable business structure, it is important to understand the difference between an SPV and a trading limited company.

A limited company will usually conduct business, have employees, buy and sell a product or service and function as a trading business.

An SPV company does not trade. It is simply an entity through which to buy property for the purpose of letting the property. The only revenue which goes through this company is letting revenue.

There are buy-to-let landlords that will purchase property within the framework of an existing limited company that is trading. They will have very specific reasons for doing so. Nevertheless, a new landlord wanting to set up a new business will normally be advised to consider an SPV.


SPV Limited Company for Buy-To-Let

There are mortgage products available for individual landlords who operate as sole traders, for trading limited companies, and for SPVs. The majority of buy-to-let mortgage products, however, are available to SPVs and this is the legal framework that most financial and lending institutions prefer.

Buy-to-let mortgages provided to SPVs are quicker to process and easier to obtain. This is because the underwriting process is a lot simpler than when a private limited company or a sole trader apply for a BTL mortgage.

Underwriters who specialise in buy-to-let mortgages also have a specialist understanding of SPVs which makes the process quicker. Because there are more product options available to SPVs, pricing is inclined to be lower, making it a far more competitive market in which to be seeking a mortgage.


SIC Codes

Underwriters will check to see that the SPV limited company is registered at companies house under the correct SIC code. The SIC (Standard Industrial Classification) code is issued at registration to classify the type of economic activity that the company engages.

For a buy-to-let SPV, this code would be for letting property. This code will be used when submitting your annual return to companies house and you will select it from section L, under real estate activities.

The two SIC codes that funding institutions prefer to see are 68100 – this is buying and selling of own real estate and 68209 – this is other letting or operating of own or leased real estate.

Even though SPVs are favoured by lending institutions when it comes to buy-to-let mortgages, the directors will still have to provide guarantees in the same they would for a trading limited company.


The SPV Limited Company Name

It is interesting to note that the name of the company also influences how SPV limited company buy-to-let underwriters view your application. Apparently, a real no is having the word development in the name, the name should be neutral and remain relevant for the lifetime of the SPV.

This is advice that is given by mortgage consultants so remember, if you’re going to invest in buy-to-let property through an SPV, it’s a very good idea to speak to a specialist broker.


Registration and Cost

Registration is easy and costs are low. While you can do it all by yourself, it is advisable to take the advice of a buy-to-let specialist first or possibly even let them do it all for you. This will ensure that all the correct information has been submitted and that there will be no errors to reverse at a later stage.

When deciding whether you wish to consider proceeding with your buy-to-let business within an SPV, it is critical that you get the appropriate advice from a tax consultant. Most investors in buy-to-let property invest to enjoy the tax benefits, however, it is never that simple. Obtaining advice before you register an SPV will save you the frustrations and difficulties with undoing hastily made decisions later.

In most cases, an SPV is considered the best route to follow for your BTL investments, there may, however, be the rare occasion when this is not a good idea and will take the knowledge and expertise of an expert broker or tax accountant, such as Belgravia Finance, to help you decide.


Ltd Company Buy To Let Stamp Duty

For a limited company, buy-to-let stamp duty has become one of the biggest incentives that dictate how they will continue to trade as a landlord.

There have been huge changes in the regulations covering the buy-to-let market. The most immediate has been on those landlords that are individuals. Buy-to-let landlords usually trade either as a limited company or as an individual.

Together with changes in the tax structures surrounding mortgage interest and the Prudential Regulation Authority’s new rules surrounding lending, buy-to-let landlords must also consider the implications surrounding stamp duty and how they are affected.


Change Has Been Swift

Usually, changes in tax and other fiscal regulations are introduced slowly over several years. Changes in successive governments has meant that each has applied their policy to do everything possible to cover the deficit. Consequently, there have been quite a few rapid changes in regulations governing, tax, lending and ancillary factors such as stamp duty.

Landlords that have comfortably been running their businesses as sole traders are now faced with the stark reality of higher overheads, that could not have been anticipated a few years ago. One of the big changes is the liability for stamp duty.


Individual Landlords and Stamp Duty

In April 2016, stamp duty for private individuals increased by 3% across the board whether they were parents co-signing to help a child onto the property ladder, a second home buyer, or someone buying to let.

So, the increase jumped from zero percent, two percent, five percent, ten percent and twelve percent to three percent, five percent, eight percent, thirteen percent and fifteen percent respectively, on buy-to-let properties and second homes.

On paper, this may not seem to be very much, but the higher the value of the property, the steeper the bill becomes. Consider a landlord that already owns property buys a new property for £260,000.

At three percent of the first £125,000, they would pay £3750. On 5% of the following £125,000 they would pay £6250, and on eight percent of the remaining £10,000, they would pay £800. Compared to the previous stamp duty costs, they would be paying over three times more.


Ltd Company Buy-to-Let Stamp Duty

Ltd company buy-to-let stamp duty has not been exempted from this change. This means that, regardless of the legal structure of the buy-to-let business, all landlords will continue to incur this cost when purchasing new properties for their buy-to-let portfolio.

Established individual landlords may face a dilemma when counting the cost of the changes. If they already have a large portfolio, transferring their properties to a limited company could have substantial capital gains tax and, of course, the new stamp duty scales.

Furthermore, there have been indications that limited companies will become liable for the higher rate of stamp duty on the first property purchased, meaning that individual landlords at least enjoy relief on their first property.


Thinking Out Of The Box

Several scenarios arise from the combination of all these changes. Apart from having to consider the likelihood of further changes in the near future such as the first property being included in the higher rate stamp duty scales, conversion to a limited company to enjoy the tax benefits may not necessarily be the most prudent move to make.

Thinking out of the box, however, some landlords may choose to retain all their current properties as an individual and set up a limited company or an SPV – Special Purchase Vehicle – to at least enjoy the tax benefits of future investments.

The types of properties that the landlord invests in will also be affected by changes. Mobile homes, caravans, and boathouses will not be affected by the changes. This would mean that unless the landlord has a very specific niche in these areas of property, there is no avoiding the stamp duty liability. That is, of course, unless the landlord has a first property valued at below £40,000.

When considering how stamp duty will affect you as a landlord, it is a good idea to take into consideration all the factors that influence how you operate. If you are starting up as a new landlord then setting up a limited company will almost certainly be the best route to take.

You will be affected as a limited company in the same way that an individual landlord is, however, the tax implications on both mortgage interest and corporate tax may well mitigate the expense of stamp duty.


Get Expert Advice

It is best to speak to an expert who can take all your circumstances into consideration, including the size of your current portfolio. If you are a new landlord you will need specialist advice as you will also experience the stricter lending regulations that come into force from October 2017.


How Aldermore Are Approaching the New Buy To Let Regulations

Aldermore is a key lender in the buy-to-let market, uniquely marketing their financial products to corporate landlords that are limited companies.

They also offer buy-to-let mortgages to individuals and other legal entities, however, they have recently focused on how they are going to implement the new Prudential Regulation Authority regulations to corporate landlords.


New Regulations Since January 2017

Aldermore has been proactive in implementing the new regulations as they became effective in January 2017. The regulations are being gradually implemented most likely to allow brokers, financial advisors, and even professional and corporate landlords time to adjust.

The regulations now require stricter criteria when lending for buy-to-let. The regulations, however, are now quite specific about buy-to-let landlords and specifically portfolio landlords. According to the PRA (Prudential Regulations Authority), portfolio landlords are those that have four or more buy-to-let mortgages within their property portfolio.

Mortgages against personal homes, holiday lets, commercial, mixed-use property, and second homes are excluded from these criteria. However, where property is held within a limited company where a borrower owns 25% or more of a share, this is included as a portfolio landlord.


Additional Documentation Requirements

There has always been a requirement to produce documentation when applying for a buy-to-let mortgage. The regulations are now quite clear about the requirement to produce even more documentation.

The borrower’s full business plan and complete details of the borrower’s current portfolio are also required. Although the requirement means that there will be more “paperwork”, digital or otherwise, Aldermore is making the effort to streamline the process for their clients.



Aldermore has provided templates that are easy to use and understand and contain all the straightforward questions that cover the information that is required under the new PRA regulations.

The borrower is asked to provide information relating to the proposed security and their entire portfolio for the following twelve months. These templates are not tick-box solutions, and the questions should be carefully considered when the template is filled out.

The underwriters at Aldermore will be taking particular note of these answers not only to fulfil the new regulations but also to ensure that they are lending responsibly and securely. As the newer regulations come into effect in October 2017, more lenders are expected to take on the approach that requires templates to be completed, easing the requirement for additional information on both borrowers and lenders.


Cash Flow Forecasts and Asset & Liabilities Statements

Most lenders are expected to require a cash flow forecast, supported by a complete statement of assets and liabilities. Aldermore will require both a statement of assets and liabilities and a cash flow forecast when the borrower has eleven or more mortgages on buy-to-let properties with them.


Portfolio Reviews

An entire portfolio review will now be expected including at background properties. This will include properties that have been mortgaged with other lenders. Overall, this exercise will become one of affordability and risk, a task that has now become a requirement under the new regulations.

Additionally, Aldermore will include a closer look at calculating a weighted interest cover ratio for the entire portfolio based on single units in individual names – 145%, single units in company names -125%, HMOs in individual names at 185%, and HMOs in company names at 155%. These will all be applied with a stress rate of 5.5%.

Because the properties are reviewed in aggregate, if one property doesn’t quite work out in the calculation but another has the surplus value to cover it, Aldermore will consider lending. However, if across the board the figures don’t add up then the risk will be too high and Aldermore will not lend.

It is important to remember that this is the approach of Aldermore. They have been transparent in their approach in light of the implementations of the new regulations and, in time, other lenders will also offer their approach to providing buy-to-let mortgages in the light of the new regulations.


Expert Advice

With the implementation of the new regulations already underway, it is now obvious that corporate and individual landlords alike are going to need to consider expert and unbiased advice when seeking new mortgages or when they want to remortgage. The regulations are fully implemented from October 2017, and compliance will affect both the landlords as new borrowers and lenders.

Obtaining the third-party advice is likely to become the turnkey solution for not making any mistakes in the process. If you have any questions about this topic or would like to make an enquiry about buy-to-let financing, please contact us at your convenience.

Call Us Now