What's roughly the apr% on a buy to let these days?

Tracyk_2

I'm thinking of a 2nd property to let as a holiday home. But don't really know where to start working out if it's feasible or not.

From a previous thread - am I right in thinking that if I am only offering it to let in say May, Jun, Jul and Xmas - I can take a normal residential mortgage?

Or if I offer it all year - I'd need a BTL mortgage.

Any rough ideas of interest rates on these?

I'll have 25% deposit (ish).

silvercar

All depends on each lenders' terms. Some will allow you to take a residential mortgage, but expect your income to show that it is affordable to support your main home mortgage and the 2nd home. Others will insist on a BTL mortgage, but then would expect you to let it out whenever possible - there may be restrictions on staying in it yourself.

The tax rules have recently changed. More favourable tax treatment comes with letting it out and it being available to let for a certain number of days per year, among other things. Otherwise you get restricted on what you can claim the expenses against. There is also capital gains tax on the future sale to consider - there may be cases where you can claim it as a second home and your principal private residence, but then it would have to be available for your use rather than let.

A couple of threads on the tax board discussing this at the moment.

Thrugelmir

silvercar wrote: »

.

The tax rules have recently changed. More favourable tax treatment comes with letting it out and it being available to let for a certain number of days per year, among other things. Otherwise you get restricted on what you can claim the expenses against. There is also capital gains tax on the future sale to consider - there may be cases where you can claim it as a second home and your principal private residence, but then it would have to be available for your use rather than let.

A couple of threads on the tax board discussing this at the moment.

Less favourable rules come into effect in 2011. As losses will no longer be allowable to be offset against other taxable earnt income. Also property has to be let for more days in the year to qualify as a holiday let. So a higher proportion of the rental income could end up being taxable if the conditions aren't met.

Tracyk_2

I'm presuming that in theory - it shouldn't run at a loss though??

luckyfool

Depends if its being bought as a holiday let, or as a holiday home 1st, with some holiday letting on the side. Obviously if its bought as a business proposition with the intention of year round letting then it seems a bit pointless if it runs at a loss. If you are just going to rent it out for a few months during peak season to offset some of your mortgage costs, but you bought it primarily as a holiday home for yourself then its a different matter.

Thrugelmir

Tracyk wrote: »

I'm presuming that in theory - it shouldn't run at a loss though??

Simply put. The advantage [STRIKE]is[/STRIKE] was that you get the benefit of buying a 2nd home while offsetting some of the cost.

So under the old rules providing you let a property for 70 days and over a year. All the mortgage interest incurred (after deduction of rent) was offsetable against your own tax bill.

There was no need to make a profit on the holiday letting.

silvercar

Thrugelmir wrote: »

Less favourable rules come into effect in 2011. As losses will no longer be allowable to be offset against other taxable earnt income. Also property has to be let for more days in the year to qualify as a holiday let. So a higher proportion of the rental income could end up being taxable if the conditions aren't met.

I think these changes have been delayed, see here from the direct.gov website:

"Changes to the furnished holiday letting rules
The 2009 Budget announced an intention to withdraw these rules from 6 April 2010 for Income Tax and Capital Gains Tax. For Corporation Tax the date was 1 April 2010.
The June 2010 Emergency Budget announced that the change won't take place now and the rules will continue to apply for the 2010-11 tax year.
The government has issued a public consultation document which sets out the proposals to amend the rules from April 2011."

Thrugelmir

silvercar wrote: »

I think these changes have been delayed, see here from the direct.gov website:

New rules come into effect from the new tax year starting April 2011.

They also affect the ownership of overseas property as well as the UK.

silvercar

Thrugelmir wrote: »

New rules come into effect from the new tax year starting April 2011.

They also affect the ownership of overseas property as well as the UK.

According to the website, they are still consulting on the new rules.

Tracyk_2

No I intend to let it purely commercially - it will only be within a couple of miles where I live so not much use as hol home for me.

PasturesNew

I think under the old rules you had to make it available for 140 days and rent for X. Current pencilled-in agreement is that now you have to make it available 210 days to get any tax benefits and rent it for 1.5x X.

I had an interview at a long-standing, highly successful holiday lettings place the other week, I asked them how bookings were and they said "down on last year" and then I asked about the tax changes and how it had affected business and they said "loads of owners are selling up".