Specialist Lending - May 2017  

How to overcome obstacles in complex buy-to-let

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Changes in the complex buy-to-let market

4) Think long-term

Mr Church also believes while the SDLT has caused a slowdown, which is “bad news for the health of the housing market”, there has been a silver lining in that investors have seen the capital value of their investment far outstrip SDLT charges.

For this reason, advisers need to encourage clients to think more long-term about the place of property in an overall investment portfolio, and how buy-to-let fits with their investment objectives.

He explains: “The slower growth of high-value property prices has had a positive impact on affordability in this segment of the market. 

“According to our research, while last year’s Stamp Duty changes have left landlords and second homebuyers in the top 5 per cent of the market paying £33,639 extra tax, the resulting slower growth in house prices has actually saved them £40,827.”

As ever, the reasons for investing in property should not be made purely on the basis of short-term tax takes but for reasons of long-term financial planning.

5) Timing

Jamie Smith-Thompson, managing director of advisory firm Portafina, highlights potential obstacles with the time it can take for complex buy-to-let mortgage applications to go through.

He says: “A major challenge is getting the mortgage through the underwriter of the lending company for the complex buy-to-let client.

“The underwriting criteria is more detailed and involved than it used to be, and the client will be expected to provide a substantial amount of detailed information throughout the process.

“As a result”, he continues, “such obstacles to a smooth flow in the process can have time implications. The worst-case scenario is where the product is taken off the market by the lender before the completion of the process.

“The challenge here for the IFA is to manage the client journey as much as possible to reduce the time involved to reach a positive outcome with complex buy-to-let.”

5) Portfolio landlords

Underwriting is set to be even more complicated. Under the Prudential Regulation Authority’s new underwriting and affordability criteria, complex buy-to-let borrowers with four or more mortgaged buy-to-let properties will be classified as portfolio landlords.

As a result, they will be subject to specialist underwriting standards and it will be incumbent upon lenders to determine how to verify the number of mortgaged buy-to-let properties owned by the borrower.

Therefore, brokers must make sure their clients can furnish lenders with substantial and appropriate documentation, as well as providing as much information as possible to make the complex buy-to-let application successful.