Mortgage Loan Deal Helps Landlords With Tax
Mortgage Loan Deal Helps Landlords With Tax
In the past, I have regularly criticised the mortgage companies for not exactly being innovative, though in recent years, new entrant players like Aldermore, Paragon and Kent Reliance have increasingly shown the more established lenders the way ahead with new innovative products that meet the needs of the modern landlord.
So, I am very pleased to see a new mortgage loan deal that has just come out that actually helps landlords to reduce tax.
It is from the Leeds Building Society, who are the first lender to suggest that landlords might choose a mortgage deal that has a high upfront fee and a low interest rate as a smart way of making the most of tax relief on finance costs before the “Section 24” changes, (which affect how loan costs can be deducted from rental income for tax purposes), start to bed in.
A Quick Recap! – Section 24
First, a quick reminder for those who have been asleep at the back!
Landlords used to be able to deduct mortgage interest and other finance costs, including product fees, from rental income before calculating how much tax they should pay. But the government is phasing out this tax relief over four years to 2020-21. By 2020-21, landlords will only be able to claim a 20 per cent basic rate relief reduction on finance costs.
The Leeds Mortgage Loan Deal
High fee products enable landlords to front load funding costs and maximise the use of existing tax relief, whilst minimising the interest payable in future years when tax relief is going to become less favourable.
The lender charges £2,499 for a two year fixed rate loan at a low interest rate of 1.44 per cent for a mortgage up to 60 per cent loan to value, or 1.69 per cent if the loan to value is 70 per cent. Maximum loans are £500,000.
Mortgage Loan Deal Helps Landlords With Tax – Other Situations
There are other situations too where this kind of deal could work well.
Take a person who is going to retire in a year or two and then fall into a lower income tax bracket, she could also use the opportunity to maximise use of the tax relief before it tapers away. The lower interest rate would later help her sustain profits.
In another case, a landlord who was expecting to refurb a property might sign up for a high-fee deal in order to maximise his mortgage interest (and fee!) relief until 2020-21, but delay work on the property, since refurbishment remains tax deductible.
All in all, a smart move from the Leeds. I just hope the regulators and HMRC don’t start to say that the lenders are gaming the tax and regulation of mortgage systems.
ABOUT LETTINGFOCUS
Services for Private Landlords
We help landlords and property investors by showing them how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk. Our advice is completely independent. We take don’t commission payments or fees from anyone, ever.
Services to Businesses and the Public Sector
We advise a range of organisations too to help them develop and improve their services and products for private landlords. David Lawrenson, founder of LettingFocus, also writes for property portals, speaks at property events and is regularly quoted by the media.
HOME PAGE OF THIS BLOG: Blog
THE HOME PAGE OF THE MAIN SITE: http://www.LettingFocus.com
For general information on our CONSULTING SERVICES: Consultancy and Seminars
For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS: Property Advice
CLIENT TESTIMONIALS – from both organisations and private landlords: Testimonials
IN THE MEDIA: Recent Press Coverage
BOOKS:
“SUCCESSFUL PROPERTY LETTING”:
Our book is the highest selling personal finance and property book in the UK. Click here to Find Out More and Buy it. And if you are from an organisation and would like to bulk buy, please ask us for special rates.
“BUY TO LET LANDLORDS GUIDE TO FINDING GREAT TENANTS”:
Also, get this great new guide here, which covers everything you’ll ever need to know to avoid either you or your letting agent getting anyone other than the perfect tenant. Click Here to Buy It.
BOOK FOR TENANTS:
Kids going off and renting for the first time? My Book for Tenants is also Available
TO JOIN OUR FREE NEWSLETTER MAILER which goes to over 3,970 people (as at June 2018) just send an email to [email protected]
We do not send spam or sell our mailing list to advertisers, though we occasionally mail landlords about good products from third parties. Please put us on your “white list” to ensure you receive our emails.
OFFERS ON PRODUCTS FOR LANDLORDS and TO ADVERTISE YOUR PRODUCTS to LANDLORDS: Landlords Resources
PERUSE LAST TEN BLOGS BY GETTING THE RSS FEED: Click Here
NEXT ANNUAL SEMINAR EVENT FOR LANDLORDS: Landlord and Property Letting Seminar
TWITTER PAGE My thoughts on property, personal finance, plus a lot of other random things: Twitter
Copyright of Blog: David Lawrenson 2018. Please link to us here or quote us. We actively pursue copyright infringements. The blog is updated roughly every two weeks.