Personal Buy to Let
From the 1st January 2017 all High Street Lenders (Coventry, TMW, Accord, Santander, Skipton and BM Solutions etc) have applied the new rental coverage required by the Prudential Regulation Authority (PRA).
For buy to lets now purchased in your personal name, the High Street lenders now require rental coverage of:
145% at a nominal interest rate of 5.50% (Two year fixed).
145% at a nominal interest rate of 5.00% (Five year fixed).
We have shown below the rent now required based on borrowing £200,000 mortgage after funding a 25% deposit.
| Borrowing | Nominal Rate | Coverage | Rent Required |
|---|---|---|---|
| £200,000 | 5.50% | 145% | £1329.16 (two year fixed rate) |
| £200,000 | 5.00% | 145% | £1208.33 (five year fixed rate) |
Special Purpose Vehicle (SPV) or Limited Company Option
A popular option now is buying via a Limited Company or Special Purpose Vehicle (SPV). These are offered by Specialist Lenders. Paragon, Kent Reliance, Precise and Foundation are the biggest lenders.
For buy to lets now purchased in your in Ltd Co / SPV the lenders now require rental coverage of:
125% at a nominal interest rate of 3.85% (Two year fixed).
125% at a nominal interest rate of 3.49% (Five year fixed).
We have shown below the rent required based on borrowing £200,000 mortgage after funding a 25% deposit.
| Borrowing | Nominal Rate | Coverage | Rent Required |
|---|---|---|---|
| £200,000 | 3.89% | 125% | £802.08 (two year fixed rate) |
| £200,000 | 3.49% | 125% | £727.08 (five year fixed rate) |
The 3 major benefits of purchasing buy to let property via this route are:
- how your rental income is taxed.
- how tax relief on mortgage interest payments is applied.
- increased level of borrowing for the same rental income compared to a personal buy to let.
You can find further information on how to set up a SPV / Limited company here and additional information on purchasing via SPV / Ltd Co here.
Solicitor and Accountant Advice
As SPV lending is more specialist we recommend you speak to a solicitor and accountant before proceeding. If you do not have your own solicitor or account or feel that they do not have the specialist knowledge, we can recommend one for you. They will happily discuss over the phone your options and the implications of buying via an SPV / Ltd Co.
Why Use Neil Soundy Financial Services For Your Mortgage Advice?
- We are experts in SPV / Ltd Co lending.
- Your initial consultation is free with no obligation.
How Much Will It Cost Me For Your Advice?
A fee of £495 is payable on completion of the mortgage and Neil Soundy Financial Services Ltd will keep the commission received from the lender for arranging the mortgage.
Neil Soundy Financial Services Ltd is an appointed representative of HL Partnership Ltd which is authorised and regulated by the Financial Services Authority.
The Financial Conduct Authority does not regulate some forms of buy-to-lets.
We do not give or imply legal or taxation advice. We recommend you contact a solicitor or accountant for advice in these areas.
Think carefully before securing other debts against your home/property. Your home/property may be repossessed if you do not keep up repayments on your mortgage.
