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.