Bespoke Finance

BTL Stress Test - Personal v LTD Company

The government has introduced new tax legislation which will affect rental income from residential properties.

Borrowers in personal names are likely to be affected from 2017 and incrementally worse over a four-year period.

In response to the government changing the regulatory framework for Tax, lenders have started to respond.

BM Solutions today (15 February) will consider the effect these tax changes will have on affordability for future applications. Other Buy to Let Lenders will soon follow their example.

Buy to Let Mortgage Lenders have to consider the increase in your tax liability reducing your rental income and affecting your ability to service the mortgage and the sustainability of your portfolio.

While the changes are being phased in over time, lenders have to be confident that lending they agree today is sustainable over the long term.

Landlords are looking at what they can do to mitigate the new tax and are talking to their accountants. Leading to recommending Limited Company Buy to Let Mortgages.

The question the lenders risk departments must be asking? if the new tax only affects properties in a personal name. Limited Company applicants should continue the current stress tests as they are exempt?

Our Buy to Let Specialist Mortgage Advisors is watching closely how the market implements the new legislation in affordability.

The tax brings forward a big difference in Limited Company v Personal Name. The proposal to a lender may see lighter touch affordability in a Limited Company structure by mortgage underwriters in the future.

All these affordability changes are coming, at a time when the BoE is asking the government for powers to enforce binding rules.

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