Rental cover to be lower for Ltd company BTL applications than individual!

by Neil Patterson

16:40 PM, 16th May 2016
About 3 years ago

Rental cover to be lower for Ltd company BTL applications than individual!

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Rental cover to be lower for Ltd company BTL applications than individual!

foundation home loans Buy to LetFoundation Home Loans will increase its rental cover requirements to 145% for individual applications, but leave limited company products at 125%.

Simon Bayley, commercial director, said: “There is no doubt that with the new restrictions on tax relief which landlords can claim back and now the hardening of the rental cover calculation, the limited company option is really gaining ground for a greater percentage of landlords, particularly those who are coming to BTL at this point.”

“We have been delighted by the response to our limited company offering, which is priced at the same rate as our individual BTL products. Landlord are recognising the efficacy of a limited company option and as long as there is a recognition of the pros and cons, the scales are coming down more heavily in favour of this approach.”

New lender, Foundation Home Loans, has launched into the Buy to Let market specialising in criteria for investing in the name of a Limited Company post clause 24.

This niche will in particular allow new investors to start by avoiding the mortgage interest relief penalties of borrowing in a personal capacity without a mark up in rates over standard products.

I met with their Director of Business Development last week and Foundation have sprung from the old Gmac team who were massive pre credit crisis. The idea is to launch with niche criteria USPs to assist Landlords in the new evolving Buy to Let market.

Key Criteria:

  • Limited Company interest rates the same as personal BTL
  • First time landlords accepted
  • No minimum income
  • No minimum time employed or self employed
  • Maximum age 85
  • Max 75% LTV
  • Stress testing at pay rate for 5 year products or 5.25% and @ 125% interest cover
  • No Credit Score
  • Remortgage from a Bridge inside 3 months at open market value

Standard products at 75% Loan to Value start at 3.69% for a 2 year fixed, 3.89% for a 3 year fixed and 4.39% for a 5 year fixed. All available in the name of a Limited Company SPV for the purpose of property rental.

Foundation will also consider customers with light adverse credit eg a satisfied default and one missed mortgage payment at a slightly higher rate.

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Comments

David Price

16:56 PM, 17th May 2016
About 3 years ago

The reaction of foundation home loans is discrimination against private landlords, understandable in the light of the Osborne attacks, but nevertheless discrimination. This inevitably leads to the conclusion that Osborne's taxes are discriminatory. Quelle surprise.

Commercial Trust

11:07 AM, 18th May 2016
About 3 years ago

Discrimination? Perhaps. But is it unlawful?

In short, no. One's status as a private or corporate individual is not a 'protected characteristic' under the Equality Act 2010. If a service provider enforced rules that adversely affected people because of their religion or sex, then it would be a different matter.

Even age, which [i]is[/i] a protected characteristic, is a valid criteria for lending restrictions. Since 2012, an exemption from EA 2010 has allowed lenders to exclude some borrowers on the basis of age if it is objective and relevant to do so.

[url=http://www.financial-ombudsman.org.uk/publications/policy-statements/age-insight-briefing-2015.pdf]FOS – Just a number? Age, complaints and the ombudsman[/url]

Lenders will make commercial decisions based on market conditions. Applying higher DSCRs for private landlords is no different to, and no less lawful than, doing the same for HMO borrowers (something lenders have been doing for some time) or charging higher interest rates to first-time landlords.

As an initial response to the new tax rules, and at a time when the economic future of the UK is uncertain, this sort of criteria change is to be expected. Once the market adjusts, we might see more case-by-case risk assessment and individual underwriting.

In the meantime, it will be interesting to see how the judicial review of FA 2015 s. 24 pans out.

Commercial Trust

11:11 AM, 18th May 2016
About 3 years ago

Discrimination? Perhaps. But is it unlawful?

In short, no. One's status as a private or corporate individual is not a 'protected characteristic' under the Equality Act 2010. If a service provider enforced rules that adversely affected people because of their religion or sex, then it would be a different matter.

Even age, which is a protected characteristic, is a valid criteria for lending restrictions. Since 2012, an exemption from EA 2010 has allowed lenders to exclude some borrowers on the basis of age if it is objective and relevant to do so.

FOS insight briefing – age, complaints and the ombudsman

Lenders will make commercial decisions based on market conditions. Applying higher DSCRs for private landlords is no different to, and no less lawful than, doing the same for HMO borrowers (something lenders have been doing for some time) or charging higher interest rates to first-time landlords.

As an initial response to the new tax rules, and at a time when the economic future of the UK is uncertain, this sort of criteria change is to be expected. Once the market adjusts, we might see more case-by-case risk assessment and individual underwriting.

In the meantime, it will be interesting to see how the judicial review of FA 2015 s. 24 pans out.


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