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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 0345 345 6788
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Question
I’m thinking of investing in a second buy-to-let property worth £350,000. Will I have to pay capital gains tax on it and if so is there any way of reducing it?
Answer
I’m not a tax specialist so do take professional advice to clarify what’s best for your situation. However, I can tell you that capital gains tax is payable on any property you sell which is not your main residence. The only way to possibly reduce it is to purchase the property through a limited company. Companies are not subject to CGT although the sale of the property would generate a profit on which you would pay corporation tax.
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Question
How much do I have to be earning to take out a buy-to-let mortgage?
Answer
The majority of lenders want the borrower to be earning £25k a year. This can be made up from different sources for example: PAYE, dividends, pension, rental profit and so on. However, there are some lenders who do not have a minimum income requirement so do get in touch if you need help.
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Question
My mother owns a house two-bedroom house worth about £220,000 and I’d like to rent it out and also release some equity from it that can then be used to purchase another property. Would I have to take out a buy-to-let mortgage? As the house is in my mother’s name would she have to be on the mortgage?
Answer
As the house is in your mother’s name it would have to be her who takes the mortgage as the borrower and the owner of the property need to be the same. So yes, a buy-to-let mortgage is likely to be the most appropriate way to fund this, but unless you opt to be added to the title deeds (via a transfer of equity) the mortgage would be in just your mother’s name.
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Question
I’ve finally managed to find a property in my price range I would like to buy. However, it’s in need of some work. If I take out a buy-to-let mortgage, can the lender top it up so I can pay for refurbishments?
Answer
Generally speaking, to get a buy-to-let mortgage the property has to habitable and ready to let. If it’s not, you might have to consider some form of short-term finance first to carry out the work. Many landlords use bridging or refurbishment loans which are more expensive than buy-to-let mortgages, so it’s important to do your sums. If the property is ready to let but you want to improve it, you could take out a buy-to-let mortgage, then wait six months before applying for a further advance to carry out the improvements – subject to meeting the lender’s criteria of course.
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Question
Is it advisable to take on a buy-to-let mortgage for a house with sitting tenants? Can I get access to information to find out how reliable the tenants are with their monthly rental payments before I buy?
Answer
From a mortgage perspective, this would be fine if the tenant is subject to an assured shorthold tenancy agreement. From the perspective of being a landlord, this is more subjective. Taking a property with a tenant in situ can be good as it means that you will receive the rent from day one (your solicitor will orchestrate changing the tenancy into your name). However, it also means that you have had no input into selecting your tenant. I recommend you carry out checks as if they were new tenants before deciding. Do a credit check and get references. I am sure that you would be able to speak to the vendor and/or letting agent to get confirmation of the tenant’s track record with payments and behaviour.
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Question
Is there an age limit on getting a buy-to-let mortgage and will my bank give me one with a 25% deposit?
Answer
All lenders have different rules. The youngest borrowing age for getting a buy-to-let mortgage is 18 but only as a second applicant. The main applicant must be at least 21-years-old. As to upper age limits there are several lenders that will accept borrowers up to 85 years of age at the end of the mortgage term to 75% loan-to-value. A few that have quirky rules and will go higher. For landlords borrowing via a limited company, a few lenders including Keystone Property Finance has no upper age limit.
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Question
My parents own their house but are currently strapped for cash. If they sign their property to me, is it possible to take out a buy-to-let mortgage to help them release money?
Answer
It’s unlikely that any lender would lend in this instance. Firstly, this would be classed as a regulated buy-to-let mortgage as you would be letting the property to immediate family – there are only a couple of lenders which will consider these applications. Secondly, as your parents will have lived in the property prior to you owning it, they would be afforded rental protection which means that a lender would find it difficult to get vacant possession should you default on the loan making the property very hard to sell on.
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