Bank Loan for 2nd PropertyLoan from a bank for the 2nd property
As a result, they were able to repay the amount they owe the bank and secure a further 350,000 for the remainder of the work.
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New regulations for British real estate purchasers
Recent UK and EU legislation has strengthened credit requirements and may raise tax levels for UK and non-British purchasers of UK real estate1. However, for many an investor, the opportunity arising from rising housing market demands can compensate for these additional demands2. However, as in the past, real estate in the UK may lose value and investor losses may occur.
Recently, the UK property markets have seen a number of changes in tax and credit regulations either by the UK authorities or by the European Union. Here we outline some of the most important new regulations and ask professionals to help us understand the implications for real estate purchasers. A number of Europe-wide mortgages regulations came into force in the UK in March of this year, with the greatest effects on buy-to-lease investors. However, the UK's financial markets were also affected by the crisis.
According to the EU Directive on Hypothecary Credits (MCD), which came into effect on 21 March 20161 , creditors must differentiate between beginner and advanced lessors when handling loan requests for buy-to-lease mortgages, even from foreigners. Beginners " are those who rent a house in which they have previously been living, or those who have acquired a property.
It is now regarded as credit to consumers and is subjected to stricter public regulations and controls of affordable prices. "Consumers' buy-to-let can be more challenging to reach due to affordable problems that have never really affected the buy-to-let markets before," says Simon Tyler of Tyler Management Group. "A " serious " lessor is someone who takes out a loan for the purpose of conducting a buy-to-lease transaction.
Learn more about our mortgages for overseas purchasers who buy British real estate. In addition to new regulations for applying for mortgages, changes in UK property taxation may also affect overseas property developers. As of April 2016, anyone who buys an extra property, such as a landlord or overseas investor who buys a second home in the UK, will have to add a property value added charge of 3% to the normal stamping rate3.
Amendments will raise stamp duty on a £500,000 property acquired on or after 1 April from £15,000 to £30,0004. "Buying an addition house seems to mean that purchasers, regardless of the site of a buyer's first house, are responsible for the addition levy, thus placing foreign investment within the reach of the tax," says Savills' director of housing research Mr Cooks.
Changes will also be made to the reduction in the rate of interest on mortgages, which will take effect over four years from April 2017. UK lessors will no longer be able to subtract interest on mortgages before they calculate their invoice. Changes in taxes will lower the incomes of lessors who are paying higher taxes.
E.g. a lessor with a 150,000 buy-to-let £150, 000 hypothec on a 200,000 property which has a £800 per month rental would currently have a net income after taxes of approximately 2,160 per annum if they are a higher UK resident 40% payer. John Charcol's Ray Boulger, Sr. Technology Director at John Charcol, described the three most important changes in buy-to-let as "triple whammy".
So, unless enough renters are convinced and empowered to buy their homes through the new home owner incentives, the likely decline in real estate available for rent will drive up rents," he says. Further small changes to the purchase option are the elimination of the 10% yearly purchase option for wearing parts.
As of April 2016, this will be superseded by a system that will only allow lessors to benefit from reduced taxes if they actually substitute for the furnishing of the leased accommodation6. From April 2019, the capital gains taxes (CGT) payable on the disposal of a property will also be payable within one calendar months of the date of completion and are currently due at the end of the fiscal years7.
Note that taxation regulations may vary in the foreseeable and in the coming years depending on your specific situation. You can repossess your home if you do not maintain your mortgages. Keep in mind that if the loan is in a different denomination than your home denomination, changes in the foreign exchange rates may raise the value of the loan in relation to your home denomination.