SPV Buy To Let Mortgage
Special Purpose Vehicle (SPV) Buy To Let Mortgage
Why choose our service for SPV buy to let mortgages?
Fair Mortgages can provide you with a first class buy to let service.
Special features of what we offer include:
- Access to specialist lenders who will lend to SPVs
- Great rates - Access to leading market rates
- Exclusive deals - Access to exclusive mortgage deals not available on the high street
- Fast turnaround - Call us if you need to move fast!
- Raising additional finance - If you are looking to raise finance we will look at all your finance options as well as remortgaging.
To investigate your buy to let mortgage options, call our specialist team on 0117 403 4474 or fill in our call back form.
Tax relief rule changes
From April 2017 buy to let landlords will be faced with paying tax on their rental income generated from buy to let properties.
These new changes will mean that landlords will face much higher tax bills where previously they could offset mortgage interest against this cost. As a landlord you may be considering setting up a limited company or special purpose vehicle to mitigate the impact of these changes.
A SPV limited company is a non-trading company that exists for the purpose of buying, selling and letting out property to tenants.
How do you set up a special purpose vehicle?
There are capital gains tax implications if you are looking to set up a SPV for your buy to let properties. If your buy to let properties have increased in value since you bought them, they may be subject to capital gains tax and stamp duty costs, so it is very important to do your homework on the pros and cons of switching to a SPV vehicle. Setting up can be done online at relatively low cost using an IN01 form. Alternatively, an accountant should be able to set a SVP for you. It is important to your existing buy to let properties have to be sold at market value.
Buy to let mortgage regulation changes
Before setting up a SPV for the purposes of a buy to let mortgage, it should be noted that the regulations governing buy to let mortgages changed in 2017.
As a result of the regulation changes, lenders altered the way in which they review buy to let applications from landlords with a single buy to let property and landlords with multiple buy to let properties.
Increased Rental Coverage Ratio
Most lenders will need the landlords to provide a higher rental coverage ratio than before. Previously, landlords only required a rental coverage ratio of 125% of the mortgage repayments. Landlords now will need a rental coverage ratio of 145% and 170% for standard buy to lets and houses in multiple occupation, respectively. Lenders will require the rental coverage ratio to be based on a professional surveyor’s valuation.
Income Stress Test
Lenders will now review landlords’ income with more scrutiny following the regulation changes. Lenders will implement a stricter stress test to ensure landlords have the ability to make mortgage payments and minimise the risk of landlords falling behind on their repayments. To satisfy the lenders’ income stress test, landlords will have to show that they can afford mortgage payments in the event that interest rates increase to 5.5%.
Review of Entire Portfolio
Lenders will no longer look at properties in isolation and they will carry out an in-depth review of a landlord’s entire property portfolio. If a lender finds one or more properties in the landlord’s portfolio that is not profitable, then they will not grant the buy to let mortgage.
This is potentially the most significant change for landlords who are looking to set up an SPV or landlords with multiple buy to let properties, as landlords can no longer spread equity across their portfolio to cover a property that is not profitable.
For advice on finance for purchasing or remortgaging property in a special purpose vehicle company, please call our team on 0117 403 4474 or request a Callback.