Family Building Society has launched a buy-to-let offset mortgage to help landlords mitigate the impact of tax relief changes that apply from 6 April by making better use of their savings.
Like a traditional offset mortgage, money deposited with the society in a savings account linked to a mortgage automatically reduces the balance on which mortgage interest is charged.
From 6 April, mortgage interest relief for residential buy-to-let properties is also set to be reduced to the base income tax rate, which is 20%.
Keith Barber, director of business development at the Family Building Society, said: “Offsetting savings against your mortgage reduces the amount of interest charged. The effect of this, other aspects being unchanged, is to increase the profit from letting and increase the landlord’s overall net cash flow.
“With changes to the tax treatment of mortgage interest starting from 6 April, making best use of your resources has never been more important for landlords. This may be particularly important for retired investors relying on letting as part of their retirement income, for example.”
“It’s also an ideal way for landlords to benefit from the regular sums they put aside for maintenance and improvements, or the tax to be paid on their letting income – something to be welcomed in this historically low interest period.”
Borrowers may choose one of two options, reduced monthly mortgage payments or term reduction. Both are available on capital and interest repayment mortgages.
With the reduced monthly mortgage payments option, interest saved every month will be used to reduce the amount of the borrower’s next month’s mortgage payment, so the more that is offset, the lower the monthly payment will be.
The term reduction option helps the borrower to pay off the mortgage earlier, but won’t reduce the monthly payment.
The buy-to-let offset mortgage is not currently available to limited companies or partnerships.
The mortgage is a two-year discount at 2.99% with a product fee of £999. After two years the mortgage will revert to the Society’s standard variable rate of 5.29%. Maximum loan-to-value is 65%.
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