Buy-to-let property investors were enjoying a very lucrative business until the government decided they needed to enact changes that would discourage investors from purchasing new properties. As the thinking goes, investors needed to buy fewer homes so that consumers could buy more. While you may not agree with the government action, the mortgage broker ltd explains that you do not have to be limited by it.
A good mortgage broker can help investors get around some of the limits of new regulations. To that end, an investor’s mortgage broker could turn out to be his best friend. It all boils down to finding the most cost-effective way to expand a portfolio while also limiting tax liabilities.
The Root of the Problem
Before discussing how mortgage brokers can help, let us first talk about the root of the problem. A few years back, the government decided that landlords had an unfair advantage because they could deduct 100% of their mortgage interest from their annual taxes. Mortgage interest was viewed as a deductible business expense.
In addition to a few other changes intended to increase the purchasing power of residential buyers, the government also went after buy-to-let mortgage interest. They implemented a sliding scale that reduced the amount of mortgage interest buy-to-let owners could claim from 100% to 75% for the 2017-2018 tax year. Mortgage interest tax relief will continue to fall in successive years until it eventually settles at 20%.
The end result of lower tax relief is higher taxable income on every mortgaged property an investor owns. What’s the solution? Getting existing mortgages paid off as quickly as possible and guaranteeing that future mortgages have the lowest possible rates and shortest possible terms. That is where the mortgage broker comes in.
Most Qualified Advisers
A certified mortgage broker in the UK is considered a financial adviser with special mortgage expertise. As such, mortgage brokers are the most qualified of all financial services professionals to assist investors looking for new buy-to-let mortgages. They aren’t just brokers who know how to arrange buy-to-let mortgages; they are mortgage specialists who understand the market inside and out.
This is the kind of specialist knowledge the buy-to-let investor needs to protect his or her portfolio. The wise investor wants a broker who understands the buy-to-let market. He/she wants a broker who understands the need to limit tax liabilities. He/she wants a broker who sees interest as the enemy to profitable investments.
There Is No One-Size-Fits-All
Buy-to-let investors are fully aware that there is no one-size-fits-all financial solution for every situation. Banks don’t get that. Building societies don’t, either. Both types of financial institutions tend to offer limited options for buy-to-let mortgages – if they offer any at all. That means banks and building societies are not likely to look out for investor interests when offering mortgages.
On the other hand, mortgage brokers operate on a very different mentality. They represent scores of lenders all with different deals on the table. They know how to look at the individual investor’s needs and find a mortgage to meet those needs. They also know how to advise investors about the best types of mortgages out there.
The help of a good mortgage broker becomes priceless in those special circumstances that require a unique perspective. The creativity of an experienced broker could mean the difference between an investor expanding his portfolio or having to sit on his hands for the time being.
Expansion and Growth Opportunities
The mortgage broker’s primary responsibility on each mortgage is to find the best possible deal for the investor. Simple enough. But let us look at it from the perspective of expansion and growth opportunities. Remember that buy-to-let is an investment. The wise investor seeks to maximise his investments by continuing to expand and grow his portfolio. A mortgage broker is invaluable in this regard.
Let’s say a mortgage broker comes up with five different mortgages for five separate properties. When the investor compares those deals against the mortgages offered by his bank, the broker deals are better in each case. The net result will be a higher profit margin across all five properties.
That higher profit margin allows the investor to save more money to be put down on the next round of properties. Assuming his broker repeats the process the next time, the investor once again enjoys a higher profit margin. The cumulative effect of all these attractive mortgage deals is more profit leading to faster growth and expansion. The investor’s portfolio continues to grow, generate profit, and increase in value.
The mere act of being able to beat the deals offered by building societies and banks makes the mortgage broker a better business partner if you will. Over years of investing in a portfolio that grows to dozens of properties, the mortgage broker saves the investor a load of money while simultaneously increasing profits. That makes the broker a pretty good friend, doesn’t it?