Financing Your Property in 2021
At the start of the New Year, There is a lot going on in the Mortgage & Property World
Contributor: Roger West, Peritum Mortgages
In 2020 more than 50% of landlords saw their income reduced due to Covid and now many of them have said they will either sell up or reduce their property portfolio in 2021.
Time was when property was seen as a safe long term investment but with reduced tax reliefs and the effects of the Pandemic, not everybody takes that view.
HMRC Investigates - The Let Property Campaign
Behind the scenes HMRC are girding their loins to collect unpaid taxes from those landlords who have not entered rental income on their tax returns. In addition, their recent computer link with the Land Registry means that properties can easily be flagged for a capital gains tax assessment when sold (even if passing from personal ownership into a limited company). Those poor souls who have not declared everything they should have may also be liable for fines and penalties.
Landlords may have some breathing space because HMRC are likely to prioritise fraudulent Furlough claims and Bounce Back loans to employers in the first place – and they can be quite nasty, applying for bankruptcy orders as a matter of course.
If you, or someone you know, does end up with an investigation from HMRC, help is available – just contact us for an initial discussion.
Caution - Taking a Holiday May Damage Your Credit
Be aware of this recent change…mortgage payment holidays in 2020 did not show on credit reports but future payment holidays will show – and that will affect how a new mortgage application is assessed.
If the credit file shows 3 missed payments it is likely that a new application will be declined, so please talk to Peritum Mortgages if you are considering taking a payment holiday (this also applies to credit cards and other loans).
Living in a Money Box - The Growth of Equity Release
A market that is growing daily at the moment (partly due to the financial effects of Covid) is Equity Release, which is available for property owners over age 55.
Equity Release Borrowers do not need a minimum income and a poor credit history is not usually a problem.
This is a way of raising tax free money from a home or a buy to let property – and borrowers can use the money for any purpose. Typically, clearing a mortgage or other loan, or gifting to a family member are among the most popular uses, but it doesn’t have to be that way.
You could elect for either a single lump sum, a series of lump sums , a regular income for life or a mix of all of these. No monthly repayments are required but there is usually a facility to make occasional payments up to 10% of the original loan each year without any early repayment penalties.
For those who worry there will be nothing left for their beneficiaries when they die, it is easy to ringfence part of the property value so that it is not affected by the interest roll up and therefore remains available to beneficiaries.
There are a number of important points to consider and it is recommended that a free, no obligation personal illustration is obtained at outset . This illustration will incorporate some important terms and conditions that need to be explained and understood.
Finally, Some Very Good news; Interest rates are not only as low as they have ever been but are also fixed for the life of the mortgage providing certainty for borrowers.
Ancojada Limited trading as Prosperitas Consult is not authorised or regulated to provide financial advice.
All financial advice is provided by other regulated businesses.