Property investors could be forgiven for thinking they have a target or a bounty on their heads, such is the sheer amount of legislative change currently engulfing the rental sector.
We won't go over ground already well-trodden, but maintenance and repair deductibility, mortgage tax relief regulations and the forthcoming Energy Performance Certificate rule changes are just a handful of things hitting landlords where it hurts most - in the pocket.
But there are still some key strategies you can employ to grow your portfolio against the grain of legislation. Here are our top tips for doing just that:
A Bigger DepositThe Prudential Regulation Authority rules state that lenders must assess a landlord's ability to afford a buy-to-let mortgage - and how do they do this? They work to a system that assumes you are paying an interest rate 2% higher than you actually are. So, if you will be paying an interest rate of 4.5%, you will be assessed for affordability at 6.5%. The minimum assessment percentage is 5.5%.
Moreover, you must show that your rental income covers the mortgage by at least 125%, with many lenders using 140% as their benchmark number for this.
Paying a bigger deposit will offset the amount of mortgage interest you need to cover with rent - an extra £30,000 as a deposit could make all the difference.
Use A BrokerNot any old broker, though. Seek out the expertise of a buy to let mortgage broker, who can guide you through the property investment process as it stands now following all the changes to rules, regulation and legislation. When our car breaks down, we call the AA or the RAC - when your chances of growing your property portfolio start to misfire, it's always worth bringing in the experts to get things running smoothly again.
Go FixedFixed-rate mortgages aren't for everyone - they often have higher product fees and increased early-redemption penalties. You pay for the security of knowing your monthly budget.
But in these uncertain times, with Brexit on the horizon and many in the know predicting a slow yet steady rise in interest rates, it could pay to have the security of a five-year fixed rate loan.
But always make sure a product is the right one for you - as outlined above, use a BTL broker.
Get Your House In OrderWith any new regulation on lending comes an increase in paperwork, so with all the new rules now partially in place or fully active, it's worth getting all your documentation sorted if you are considering an increase in your portfolio.
Lenders need to see everything - and if you own four or more buy to let properties already, you now have to provide income and mortgage details for each one every time you apply for a new mortgage. It's a mountain of extra work for lenders so having your side of the bargain in good shape can give you a solid head start.
If you have any questions about a new property investment opportunity or a buy to let mortgage, speak to your local Martin & Co office today.