Information which lenders might request include:
- Borrowers’ previous history and experience in the buy-to-let market.
- Data on the borrowers’ full portfolio of properties and outstanding mortgages.
- Documentation on all the assets and liabilities of the borrower, including any tax liability.
- Paperwork outlining the merits of any new lending in the context of the borrower’s existing buy-to-let portfolio, together with a business plan.
- Historic and projected cash flows associated with all the properties.
Louisa Sedgwick, director of sales, mortgages, for Vida Homeloans, comments: “With these further changes to the way in which portfolio cases will be underwritten by lenders from 1 October this year, intermediaries will be responsible for understanding their clients’ circumstances in far more detail than previously, making buy to let mortgage applications potentially more complex.”
6) Seeking specialist advice
With tax matters making buy-to-let far more complicated, David Hollingworth, associate director, communications, for London & Country Mortgages, believes it is important for all advisers to have an “awareness of the changes and what it could broadly mean for a client”.
However, he adds: “Remember these are often complex issues and require specialist tax advice.
“It will be important for brokers not to overstep the market and be sure to let clients know they should take separate advice to understand the tax aspects properly, which will help them decide on their preferred approach.”
Indeed, overstepping the mark on tax could mean brokers and their clients are criminally liable for any tax avoidance, warns Chris Ioannou, senior IFA for Prestige IFA.
“With the introduction of the Criminal Finance Bill in September 2017, lenders and brokers could be held responsible if clients are avoiding their tax obligations and not declaring all their property rental income (and declaring it correctly), to HM Revenue & Customs.
“We may need to check clients are completing tax returns correctly, and that they have an accountant who is respectable and suitably qualified.”
Moreover, Mr Ioannou warns: “At what point does our responsibility and our potential liability start and stop?”
simoney.kyriakou@ft.com
