Landlords likely to favour Limited Company BTL in future

16 May 2016

Future BTL sourcing will favour Limited Company BTL, according to Foundation Home Loans, as it signals a change to the basis of its rental calculation for individual applications.

As the restrictions on tax relief begin to bite and the increase in rental cover by lenders gathers pace, the advantages of limited company products will become clearer, says Simon Bayley, Commercial Director at the Bracknell based lender.

He said, “There is no doubt that with the new restrictions on tax relief which landlords can claim back and now the hardening of the rental cover calculation, the limited company option is really gaining ground for a greater percentage of landlords, particularly those who are coming to BTL at this point.

We have been delighted by the response to our Limited Company offering, which is priced at the same rate as our individual BTL products. Intermediaries and their landlord clients are recognising the efficacy of a limited company option and as long as there is a recognition of the pros and cons, the scales are coming down more heavily in favour of this approach.

As a responsible lender, we have heeded the regulator’s calls on affordability and stress testing and are planning to change the basis of our rental calculation for individual applications from 125% to 145%, although it will not be implemented until mid-June when we make other LIBOR based changes. Limited Company BTL products remain unchanged at 125%.

Foundation Home Loans supports the regulator’s intervention to enhance the way that individual landlords are protected by a more rigourous affordability system, but also recognise that experienced landlords are more than capable of assessing risks surrounding exposure to repayment of a loan in the event of rental shortfall.”