The reduction in buy-to-let mortgage tax relief may cause more people to emigrate abroad and invest in UK buy-to-let from overseas, the managing director of Liquid Expat says.
Stuart Marshall is the managing director of Expat Packager, which submits UK buy-to-let cases for expats, and Liquid Expat Mortgages, which offers buy-to-let mortgages for expats.
Marshall said: “Lenders not already operating in the expat marketplace will have to start thinking about tapping into it because of more people leaving and becoming expats.
“With Brexit, a lot of the talent pool will leave and this is good for our business. People are realising there’s a big world out there and can experience more cultures and not living in the UK, paying UK taxes.
“If you’re an expat there’s genuinely never been a better time to take out mortgage finance. A lot of the specialist lenders have been looking for new niches.”
The mortgage tax relief changes, phased in over four years, mean 75% of finance costs are deductible from rental income from 2017 to 2018. The year after it will be 50%, the year after that 25% and from 2020 none.
Marshall added: “Some landlords may be selling off some units in the UK because of being hit harder with tax changes.
“We’ve seen more expats wanting to buy into a limited company to do buy-to-let deals but we’ve been educating them, showing a lot of the time, it’s not worth the time and the cost to set up.
“Expats can earn a certain amount in the UK before paying tax and property purchasing may not take them over that amount, meaning they wouldn’t be affected by these tax changes.”
Landlords have had to pay 3% more stamp duty since April 2016, something which Marshall found positive for expats.
He said: “It hasn’t had a negative impact on the number of mortgage applications from overseas landlords. It just means they are looking at more efficient properties and doing due diligence on them with the cost involved and rental yield.”
The Prudential Regulation Authority brought in regulation from 2017, requiring applicants with four or more mortgaged buy-to-lets to provide more information about their existing portfolio.
Marshall said: “There won’t be much change because in the expat marketplace lenders are more cautious, always looking at affordability and there’s more underwriting too.”
He said that it’s this manual underwriting that makes the process take longer. “Getting tested and certified passport copies is the most difficult because a British embassy may be far away and there may be a long wait.”
Marshall reckoned that with technological improvements, the process will quicken eventually.
He said: “It will do but will take one major player with a lot more digitally driven processes and once established, lenders will have to follow suit.
“Marsden is the first lender we have trialled doing these passport checks digitally and achieved a 100% success rate, meaning they all worked digitally without needing having to go to an embassy.”
He felt the expat marketplace for lenders is as competitive as ever and new entrants must add something new.
He added: “There is space for new entrants if they have a clear criteria and rate that fills the gap existing lenders are not covering.
“We aim to continue to bring new lending products expats can benefit from, make application process smoother and educate all the expats that see getting a mortgage in the UK as a problem.”