Let's get the remaining BTL tax relief removed

[mrtickle]

2 hours ago, SOLZHENITSYN said:

??This. It’s epidemic in London. No one sells. Ever. They just remortgage, lever up and buy another. Too much potential profit to consider selling. 

I would have thought that the MMR tests prevent them affording two mortgages.

 

[SOLZHENITSYN]

25 minutes ago, mrtickle said:

I would have thought that the MMR tests prevent them affording two mortgages.

 

Not when one becomes a BTL mortgage.

[mrtickle]

4 minutes ago, SOLZHENITSYN said:

Not when one becomes a BTL mortgage.

Drat. And, absurd. They should find that their application for the new OO mortgage fails the affordability tests since they owe £££ on the first house, with no proven history of achieving rent for it or successfully letting it.

 

[SOLZHENITSYN]

10 minutes ago, mrtickle said:

Drat. And, absurd. They should find that their application for the new OO mortgage fails the affordability tests since they owe £££ on the first house, with no proven history of achieving rent for it or successfully letting it.

 

Well, luckily the extra 3% SDLT seems to be enough to stop at least a good proportion of them doing this now 

[spyguy]

14 hours ago, BuyToLeech said:

Tax cuts targeted at tenants will only line the pockets of landlords. See also ‘the living wage’. 

Rents are set by ability to pay.

That’s why landlords can’t charge more to offset S24, but they can charge more if their tenants become richer. 

It’s difficult to overstate how damaging landlording is to society. 

90%+ of private rents are set by LHA.

Reduce LHA and private rents fall.

[spyguy]

On 05/05/2018 at 23:50, Dorkins said:

I'd guess quite a lot of second steppers who kept their first property to rent out fall into the leveraged basic rate taxpayer landlord category.

I dont think they are basic rate tax payers.

In this situation go up, so OO converts to BTL and then buys a larger house - using now equity from the first place.

Youd need to be earning a *lot* of money to be able to do this.

Id reckon that the 'Let it out and buy a new place' are the most at risk of it all blowing up.

 

[spyguy]

11 hours ago, SOLZHENITSYN said:

Not when one becomes a BTL mortgage.

No, the renting out the old place, buying a new place is dead.

MMR will treat the mortgage on the old place as an existng debt commitment. And disregard any rental income.

Most 'Let out the Old, buy a new' are using IO in both cases.

 

[Dorkins]

1 hour ago, spyguy said:

I dont think they are basic rate tax payers.

Pretty easy for an unplannedlord to be a basic rate taxpayer even with the S24 change to count rent as part of total income before assessing tax. Earn £35k at work, rent out a place at £900/month, still below the higher tax rate threshold of £46,350. If you're a few k over the higher tax rate threshold after doing that calculation chuck the extra in your pension.

[Houdini]

I did for a minute think about creating a companion petition - to level the playing field by reintroducing Mortgage Interest Tax Relief (at the standard rate) for those purchasing residential property - but when I thought about it, it would just give them ideas.

What I may well do is introduce a petition to standardise local housing allowances at a single national rate. After all why (were I on benefits) do I only be able to receive £400 (enough for a three bed terrace up north) when with the £1200 I would get down south I could have a 4 bed mansion.

Edited May 7, 2018 by Houdini

[TryingToWin]

Is having a lodger or renting out a room in my house equally frowned upon as BTL?

Like how far does this go with you guys? help me understand.

Are we saying it should be 1 room per person?

Is It OK for me to buy a block of 200 flats all for myself?

Is it just the renting of them that gripes you guys or is it simply the ownership? coz I've heard both are equally "bad"

Like if I buy my whole street, knock through all the walls and convert into 1 mega-home that's cool?

But if I keep them all separate and rent them that's Bad?

:S baffling.

[Houdini]

5 minutes ago, Dorkins said:

Pretty easy for an unplannedlord to be a basic rate taxpayer even with the S24 change to count rent as part of total income before assessing tax. Earn £35k at work, rent out a place at £900/month, still below the higher tax rate threshold of £46,350. If you're a few k over the higher tax rate threshold after doing that calculation chuck the extra in your pension.

Yep and it's why it will eventually go. The first step was the change from an expense to a relief. The next step will be a phased reduction in the amount of relief offered (from the initial 20% through to 10% and then down to 0%)...

[mrtickle]

13 hours ago, SOLZHENITSYN said:

Well, luckily the extra 3% SDLT seems to be enough to stop at least a good proportion of them doing this now 

GOOD!

1 hour ago, spyguy said:

No, the renting out the old place, buying a new place is dead.

MMR will treat the mortgage on the old place as an existng debt commitment. And disregard any rental income.

Most 'Let out the Old, buy a new' are using IO in both cases.

 

Yes I had thought it did, thanks for the correction.

7 minutes ago, Houdini said:

Yep and it's why it will eventually go. The first step was the change from an expense to a relief. The next step will be a phased reduction in the amount of relief offered (from the initial 20% through to 10% and then down to 0%)...

GOOD!

 

[TryingToWin]

13 hours ago, mrtickle said:

Drat. And, absurd. They should find that their application for the new OO mortgage fails the affordability tests since they owe £££ on the first house, with no proven history of achieving rent for it or successfully letting it.

 

Consent to Lease , Its what I used. Its a simple form anyone can use after 6 months of OO. You can simply do it online with most banks.

This way you can get a BTL on an OO rate after living in the place for 6months.

Add in the 7500/year of tax free for the "rent a room scheme" and you've got magic beans my friend.

Imagine if you have a 3 bedroom house in an area where 2 bedders only rent for 640/mo, you can lock one room "your room", rent the house out for full price and the only tax you pay is 25% council tax. Best thing is you can stay on OO rates too.

Gotta play the game lads. Gotta play the game.

[mrtickle]

28 minutes ago, TryingToWin said:

 

Gotta play the game lads. Gotta play the game.

Nah.

 

[Houdini]

29 minutes ago, TryingToWin said:

Consent to Lease , Its what I used. Its a simple form anyone can use after 6 months of OO. You can simply do it online with most banks.

This way you can get a BTL on an OO rate after living in the place for 6months.

Add in the 7500/year of tax free for the "rent a room scheme" and you've got magic beans my friend.

Imagine if you have a 3 bedroom house in an area where 2 bedders only rent for 640/mo, you can lock one room "your room", rent the house out for full price and the only tax you pay is 25% council tax. Best thing is you can stay on OO rates too.

Gotta commit mortgage fraud lads. Only way to play the game...

FTFY

[SOLZHENITSYN]

2 hours ago, spyguy said:

No, the renting out the old place, buying a new place is dead.

MMR will treat the mortgage on the old place as an existng debt commitment. And disregard any rental income.

Most 'Let out the Old, buy a new' are using IO in both cases.

 

That’s not been how it’s worked where people I know have done it.

say they own a 2 bed flat on an owner occupied mortgage that has increased in value from £250k to £350k and they put £50k down as deposit. They now have over £150k equity. Or a LTV if less than 57%.

they remortgage the 2-bed flat to a BTL mortgage and take it to 75% LTV releasing over £87.5k cash which forms the deposit on their 3 bed house on an owner occupied mortgage. 

Thats what several ppl I know have done (pre-2017 at least)

[Si1]

44 minutes ago, Houdini said:

FTFY

+1

 

plus council tax fraud?

[BorrowToLeech]

1 hour ago, TryingToWin said:

Is having a lodger or renting out a room in my house equally frowned upon as BTL?

Like how far does this go with you guys? help me understand.

Are we saying it should be 1 room per person?

Is It OK for me to buy a block of 200 flats all for myself?

Is it just the renting of them that gripes you guys or is it simply the ownership? coz I've heard both are equally "bad"

Like if I buy my whole street, knock through all the walls and convert into 1 mega-home that's cool?

But if I keep them all separate and rent them that's Bad?

:S baffling.

If you have exclusive use of land, then that imposes a cost on the rest of us. This is obvious to anyone who has had to take a detour around private land. 

But owning land is massively beneficial. Property is freedom, or at least its the nearest thing we’re going to get to it. A place where you make the rules, you live as you want, and do what you like, without having to ask permission.  More freedom is a good thing.

There is a point at which the cost of your land to everyone else is equal to the cost of everyone else’s land to you.

At that point you can do pretty much anything you like with it.

More than that, and you are a drain on society.  Your extra benefit is a handout from everyone else, a form of enforced welfare.

The cost of those welfare payments is called rent.  Clearly, it is the value of the land and the size of the rent that matters, not the area of land. Owning a mansion in the middle of nowhere isn’t as big a disruption as owning a small house in the lucrative employment market of London, which blocks people’s access to that market.

More prosaically, people taking in lodgers have not caused a housing crisis. Nor have people with large houses. Landlords have.

Whilst we can tolerate the small, theoretical cost of some inefficient land use, we can’t tolerate the very real cost of a million workshy gamblers.  The economy cannot support their welfare payments without serious damage.

1 hour ago, TryingToWin said:

Gotta play the game lads. Gotta play the game.

Only if you are a loser at all the other games.

I didn’t have to play your game, and a game of death or glory leverage which might end in a middle of the road income or might end in bankruptcy, doesn’t really appeal.

Most importantly, the game you are ‘trying to win’ is a negative sum game.  Some will come out ahead, but in total everyone loses.

The other games - effort, entrepreneurialism, skill, knowledge - those are positive sum games.  

There are millionaire owners of fast-food chains and dry cleaners. As a result of their efforts we get clean clothes and takeaway food.  

As a result of landlords we have homelessness and poverty. Nice.

The best justification for land-lording of course is the one they never use: I need to landlord, because I cannot succeed in any other way.  I take the risk and gamble because I believe I am a loser anyway. 

I have some sympathy with that, not everyone is smart enough or hard working enough to compete in the market place. But my advice to you is try harder.

 

Edited May 7, 2018 by BuyToLeech

[spyguy]

1 hour ago, SOLZHENITSYN said:

That’s not been how it’s worked where people I know have done it.

say they own a 2 bed flat on an owner occupied mortgage that has increased in value from £250k to £350k and they put £50k down as deposit. They now have over £150k equity. Or a LTV if less than 57%.

they remortgage the 2-bed flat to a BTL mortgage and take it to 75% LTV releasing over £87.5k cash which forms the deposit on their 3 bed house on an owner occupied mortgage. 

Thats what several ppl I know have done (pre-2017 at least)

I think youll find 95% of people will struggle finding that 50k in cash.

MMR PRA basically stops 85% of people increasing their mortgage debt to more than 4x household income.

[SOLZHENITSYN]

3 hours ago, TryingToWin said:

Is having a lodger or renting out a room in my house equally frowned upon as BTL?

Like how far does this go with you guys? help me understand.

Are we saying it should be 1 room per person?

Is It OK for me to buy a block of 200 flats all for myself?

Is it just the renting of them that gripes you guys or is it simply the ownership? coz I've heard both are equally "bad"

Like if I buy my whole street, knock through all the walls and convert into 1 mega-home that's cool?

But if I keep them all separate and rent them that's Bad?

:S baffling.

Each to their own, but personally I have no problem with people buying what they want, and doing with it what they want (including renting). I believe in free markets. But if you are going to buy multiple properties to rent out, it should be with your own wealth (cash buyers). Banks shouldn’t be pumping BTL as an easy way of circumnavigating lending rules around affordability (4.5x salary) for owner occupiers.

Aside from the chunky 25% deposits, the only reason banks love BTL so much is that lending multiples are based around rents which have a much higher multiple of salary than the 4.5x limit imposed by the MMR. They can also continue to lend on an interest only basis, something now not available to owner occupiers.

in short, the BTL loons have given Banks a way to lend more money than they could possibly have done to owner occupiers, and it’s these relatively lose lending conditions that have inflated house prices at the margin.

thats how I see it anyway. Others in here know the finer details much better than myself though.

edit to add: this freemarket should be combined with a LVT obviously - if you have the cash, you can own the land. But to prevent you idly hoarding it, you need to pay the LVT. This ensures the most efficient use of that land. Also means landlords cannot profit from infrastructure paid for from the public purse. Example, taxpayers fund the construction of a railway next to your land. Base value of your land goes up, so does your LVT rate. 

Edited May 7, 2018 by SOLZHENITSYN

[spyguy]

The reason why banks like btl is that they have no historical data on it.

Its an elaborate ritual where banks have been kidding themselves that io btl - non amortising commercial lending is less risky than amortising OO loans.

And rather selling one loan they could sell 100s to fatty fergus!

Come 2007, io btl loans went off quicker than fish in august.

There was a massive bail out. Financial derualation of 1987 did not stretch to resovling banks.

Since then banks have been chasing the slightly higher yield and fees on btl. Except theyve been using BoE money, which has just stopped. 

This time bank and btler will go down.

[TryingToWin]

20 hours ago, Houdini said:

FTFY

 

19 hours ago, Si1 said:

+1

 

plus council tax fraud?

"Oh my god he has CONSENT to lease, mortgage fraud mortgage fraud!"

"Oh my god the council are insisting he is liable for council tax for having a room, but he is using that insistence to claim his tenants are therefore lodgers and not be liable to pay tax on the rent. Council tax fraud council tax fraud!"

"People are using these rules to their favour! REEEEEEEEEEEEEEEEEEEEEE!!!!"

17 hours ago, SOLZHENITSYN said:

Each to their own, but personally I have no problem with people buying what they want, and doing with it what they want (including renting). I believe in free markets. But if you are going to buy multiple properties to rent out, it should be with your own wealth (cash buyers). Banks shouldn’t be pumping BTL as an easy way of circumnavigating lending rules around affordability (4.5x salary) for owner occupiers.

Aside from the chunky 25% deposits, the only reason banks love BTL so much is that lending multiples are based around rents which have a much higher multiple of salary than the 4.5x limit imposed by the MMR. They can also continue to lend on an interest only basis, something now not available to owner occupiers.

in short, the BTL loons have given Banks a way to lend more money than they could possibly have done to owner occupiers, and it’s these relatively lose lending conditions that have inflated house prices at the margin.

thats how I see it anyway. Others in here know the finer details much better than myself though.

edit to add: this freemarket should be combined with a LVT obviously - if you have the cash, you can own the land. But to prevent you idly hoarding it, you need to pay the LVT. This ensures the most efficient use of that land. Also means landlords cannot profit from infrastructure paid for from the public purse. Example, taxpayers fund the construction of a railway next to your land. Base value of your land goes up, so does your LVT rate. 

I used to like the idea of LVT, but then I asked myself, what is LVT, like what is its function and Why do you need that function?

Council tax I understand is so that things like the bins etc and local services can be funded, sweeping streets etc.

Emissions taxes are used to fund clean energy projects, OK, that makes sense.

How do you justify LVT? what does the government intend to use the tax generated to do? How do you sell this to a voter already paying a 40% rate of income tax? will the queen be exempt?

[Houdini]

Any Consent to lease agreement will require you to not be in the property - yet you are still paying council tax there.

Yep - that paperwork screams intentional breach of terms and conditions which is fraud and as its the mortgage you are committing the fraud on, yep it is mortgage fraud.

 

 

[SOLZHENITSYN]

35 minutes ago, TryingToWin said:

 

"Oh my god he has CONSENT to lease, mortgage fraud mortgage fraud!"

"Oh my god the council are insisting he is liable for council tax for having a room, but he is using that insistence to claim his tenants are therefore lodgers and not be liable to pay tax on the rent. Council tax fraud council tax fraud!"

"People are using these rules to their favour! REEEEEEEEEEEEEEEEEEEEEE!!!!"

I used to like the idea of LVT, but then I asked myself, what is LVT, like what is its function and Why do you need that function?

Council tax I understand is so that things like the bins etc and local services can be funded, sweeping streets etc.

Emissions taxes are used to fund clean energy projects, OK, that makes sense.

How do you justify LVT? what does the government intend to use the tax generated to do? How do you sell this to a voter already paying a 40% rate of income tax? will the queen be exempt?

You need to read up on LVT , sounds like you were supporting it without having any notion of what it was about.

LVT would not be additional to income tax. It would replace it.

as for what would the revenue be used for? Everything. Hospitals, police, ambulance, fire service, roads, infrastructure, NHS...

[Dorkins]

On 07/05/2018 at 11:56, TryingToWin said:

Is having a lodger or renting out a room in my house equally frowned upon as BTL?

Like how far does this go with you guys? help me understand.

Are we saying it should be 1 room per person?

Is It OK for me to buy a block of 200 flats all for myself?

Is it just the renting of them that gripes you guys or is it simply the ownership? coz I've heard both are equally "bad"

Like if I buy my whole street, knock through all the walls and convert into 1 mega-home that's cool?

But if I keep them all separate and rent them that's Bad?

:S baffling.

Do whatever you want, just don't expect the politicians to keep the tax rules favourable to your investment model when it no longer suits them. All part of the game, innit.