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Personal income vital for first-time landlord mortgages – brokers

  • 28/06/2018
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Personal income vital for first-time landlord mortgages – brokers
Brokers have welcomed Accord’s move to launch a range of buy-to-let deals aimed at first-time landlords, but warned that lenders taking income into consideration will remain the most popular among intermediaries.

With the wholesale regulatory and tax changes implemented in the landlord sector over the last couple of years, attention has increasingly turned towards professional landlords.

Just this week Virgin Money announced a new range of deals for portfolio landlords, while research from SimplyBiz mortgages suggested that as many as two-thirds of brokers expect to write more limited company buy-to-let business this year than last.

However, appetite remains among those looking to purchase a first investment property, with Accord launching a range of deals specifically aimed at first-time landlords.

Chris Maggs, commercial manager of buy to let at Accord, said: “Since we entered this market in July 2017, we’ve seen good levels of applications from first-time landlords, with the quality at a similar level to more experienced landlords.”

David Sheppard, managing director of Perception Finance, said it was welcome that Accord had provided borrowers with another option, but added that in areas with low rental yields it will still be the lenders that can consider income into the calculation that will get the bulk of the business.

He continued: “Barclays, Virgin Money, Clydesdale and Metro Bank are the lenders that others need to follow and until they do, their market share will be diminished.  Barclays are particularly good in that they now will consider first time buyers with the fact that their lending is based on overall affordability rather than rent alone.”

Greg Cunnington, director of lender relationships and new homes at Alexander Hall, agreed that lenders who use a client’s personal income are key, as many borrowers only have a 25% deposit.

He continued: “Barclays and Clydesdale are long established great lenders in this space but recent changes into this area this year from in particular Virgin, NatWest, Metro and Precise have also been very welcome and they all have strong propositions.”

James Mole, financial adviser at Gingko Independent, described Accord’s launch as a “good move”, arguing it was “a little ridiculous” for any lender to have an issue with a first-time landlord if they already own a residential property.

James McGregor, director of MESA Financial Consultants, said that he has used Paragon on numerous occasions for first-time landlands. He said: “A lot of our clients are self employed and higher rate tax payers, so we end up working with their accountants and advising on limited company products.

“Paragon have a simple 5% at 125% rental calculation and the clients can move their money between their own companies without any tax liability. This allows them to use the money instead of drawing it as a dividend and paying further taxes on top of their corporation tax.”

Mole added that there is still room for more lenders to move into the limited company space.

He said: “It boggles my mind that the market has been moving in the limited company direction for two years now yet mainstream lenders are taking an awfully long time to catch up.”

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