A new buy-to-let offset mortgage has been introduced by Family Building Society, intended to help private residential landlords to mitigate the impact of tax changes on the sector.
Through the new product, money deposited with the society in a savings account is automatically linked to a mortgage, reducing the balance on which mortgage interest is charged.
The mortgage is a two-year discount at 2.99 per cent with a product fee of £999. After two years, the mortgage will revert to the Society’s standard variable rate of 5.29 per cent. The maximum loan to value is 65 per cent.
Director of business development Keith Barber says: “Offsetting savings against your mortgage reduces the amount of interest charged. The effect of this, other aspects being unchanged, is to increase the profit from letting and increase the landlord’s overall net cash flow.
“With changes to the tax treatment of mortgage interest starting this week, making best use of your resources has never been more important for landlords. This may be particularly important for retired investors relying on letting as part of their retirement income, for example.”
“It’s also an ideal way for landlords to benefit from the regular sums they put aside for maintenance and improvements, or the tax to be paid on their letting income – something to be welcomed in this historically low interest period.”
Borrowers may choose one of two options, reduced monthly mortgage payments or term reduction. In the first instance, interest saved every month will be used to reduce the amount of the borrower’s next month’s mortgage payment, so the more that is offset, the lower the monthly payment will be. This option is available on interest-only as well as capital and interest repayment mortgages.
The term reduction option helps the borrower to pay off the mortgage earlier, but won’t reduce the monthly payment. This option is available on capital and interest repayment mortgages.
The BTL Offset Mortgage is not currently available to limited companies or partnerships.