Buy to let mortgage without Tax Calculations
Before I explain the situation pertaining to mortgages; I need to make clear Niche Advice is a Mortgage Broker not an Tax Adviser, and would stress the importance of staying on top of your tax affairs will the help of an Accountant.
If you are a Landlord and have applied for a buy to let mortgage in the last 2 years you would have probably been asked for your Tax Calculation SA302s.
Originally Mortgage Lenders wanted the Tax Calculations as a quick way of determining the profit the property(s) were making. To do this they simply review the entry under the heading UK Property & Land. In theory a useful reference point as it is net of mortgage costs, service charges, ground rent, management charges, factors in rental void periods and renovations i.e. it is pure profit after costs. To obtain and evidence all these components would if course been challenging and time consuming, particularly on large and dynamic property portfolios, so the Tax Calculation is a happy compromise for the Mortgage Lender.
More recently Mortgage Lenders have been using Tax Calculations SA302s with their counterparts Tax Year Overviews to gauge whether there are outstanding tax liabilities from past tax years which is something they frown on as it portrays signs of mis-management of your finances.
As a Mortgage Broker I regularly hear of negative tax returns due to large expenditure on property, and in some cases no returns at all. The good news is not all hope is lost. One Mortgage Lender we use rarely asks for Tax Calculations as they adopt a different approach to underwriting which focuses predominantly on the gross rent in relation to the mortgage payment.
Working with the Mortgage Advisor the gross rental figure is calculated from current tenancy agreements. It is then declared to the Mortgage Lender on the mortgage application. The Mortgage Lender will then reference their local knowledge and websites such as Rightmove and Zoopla to check the rental level declared as realistic. Then they normally are ready to approve the case. That’s right no Tax Calculations or bank statements.
This approach will suit many Landlords particular those who have added significantly to their portfolios since the last Tax Calculation.
Niche Advice offers appropriate advice to Landlords looking to mortgage their buy to lets including those without Tax Calculations.