May 22nd, 2020
The coronavirus pandemic is unlike anything we’ve seen before and people across the UK have been placed under a government lockdown. This period of uncertainty has caused financial worry for many people, including contractors and the self-employed. However, there are a number of ways that homeowners can save money during this time by moving quickly and making small changes.
Consider the cost of your mortgage and your provider
One thing you could do is look at your mortgage costs and consider switching. It’s important to review your current terms to confirm whether you can find a cheaper mortgage elsewhere.
The recent Bank of England base rate cut has not provided a wave of interest rate reductions, largely due to existing funds already being priced at historically low-levels. It’s important to maintain an ongoing review of the market as lenders will need to review their pricing in the future, to combat the negative effects of the current crisis. Many lenders are currently offering highly competitive long-term fixed-rate options, so there has rarely been a better time than now to consider your future lending needs.
It’s best to act quickly to avoid any changes in legislation
Many lenders are changing their criteria frequently in line with frequent government announcements. This is why it’s best to move quickly when deciding on whether to get a new mortgage or not. If you are a first-time buyer now is the ideal time to invest in property as you can benefit from both lower house prices and lower interest rates. If you’re self-employed or a contractor it’s essential to understand what impact the furlough scheme and the government’s bounce back loan scheme could have on your chances of borrowing a mortgage.
Putting your buy to let mortgage through your limited company – can you actually do it and if so, why now?
If you are a contractor or business owner operating through your own limited company, you can buy a property through your business or subsidiary. Lending options vary and in some cases, it is preferred to hold a separate company to manage the properties through, but there are considerable tax savings in using this method to buy rental properties.
One of the benefits of purchasing a property this way is the way the rental income is taxed; you will be liable for corporation tax instead of income tax. Corporation tax currently sits at 20% for earnings of £300,000 or less, whereas some income taxpayers can pay 40% on tax or even higher if they earn over £50,000 a year. Any rent profits that are declared as salary or dividends will be taxable within your income bracket, but there are ways to take your dividends and maximise tax efficiency.
Alternatively, you can keep the funds in the company and put them towards the next property that you invest in.
Due to ever-changing legislation, now may be the ideal time to purchase a property through your limited company. Some lenders have had stricter guidelines in place for borrowing in recent months due to the COVID-19 outbreak. However, with the reintroduction of physical property surveys, these mortgages are beginning to become available once more. Investing in a property is likely to become a strong option in coming months as you can benefit from potentially cheaper property prices and lower interest rates.
It’s important to seek professional advice before making a final decision on this matter. At CMME, we are a contractor and self-employed mortgage specialists who have expertise and years of experience. Our team will be happy to provide impartial, bespoke advice based on your individual circumstances.