A female client contacted Ingard following the death of her partner. The lady was not married and had recently inherited four buy to let properties which were previously solely in her partner’s name. The properties were unencumbered and in total worth £1.4m.
Due to the customer and her deceased partner being unmarried, the customer had received an inheritance tax bill to the value of £430k. The maximum an unmarried individual can inherit before inheritance tax at 40% kicks in is £325k. The customer now needed a buy to let mortgage to clear an inheritance tax bill but was struggling to find a high street lender who would help her because she has earned no income from an employed role and many high street lenders will not lend to pay a tax bill.
We are currently working with the customer to remortgage the properties. Due to the buy to lets generating a gross rental of £5600 per month, we have secured mortgages on the properties with a specialist buy to let lender. If this case was presented to us after the 30th September, then, unfortunately, we would be unable to assist this customer, due to the new regulatory changes being imposed by the Prudential Regulation Authority.
From 30th September 2017, landlords with four or more mortgaged buy to let properties will be classed as portfolio landlords. Under the PRA’s new requirements, landlords will face much tougher affordability checks and lenders may request detailed supporting information; such as business plans, cash flow forecasts, bank statements, SA302s, tax returns, income and expenditure etc.
As this customer’s partner owned and managed the four properties and she can show no experience in this field, she would be unable to secure funding and therefore would be forced to sell the properties to clear the inheritance tax bill.
As the old saying goes, prevention is better than cure. If the customer’s deceased partner had taken out life insurance, costing just £43.26 per month, * then this would have covered the full inheritance tax bill. The buy to let mortgage on the properties will now cost the customer £1505 per month – this is a huge difference!
We cannot stress enough the importance of taking out adequate insurance to protect yourself, your family and your property. Our team of Mortgage and Protection Advisers can provide you with a free quote to ensure you are sufficiently covered.
If you have any questions or would like help finding the best mortgage, loan or insurance deal, then call us on 01702 533 400 or request a callback.
This case study is for illustrative purposes only.
*This quote was correct at the time of publishing.