The Family Building Society has launched a buy-to-let offset mortgage, aimed at helping private residential landlords to mitigate the impact of tax changes that apply from 6 April, by making better use of their savings.
Money deposited with the mutual in a savings account is linked to a mortgage automatically. This reduces the balance on which mortgage interest is charged.
“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,” said Keith Barber, director of business development at the Family Building Society.
“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 mortgage is a two-year discount at 2.99% with a product fee of £999. After two years the mortgage will revert to the Society’s standard variable rate of 5.29%. Maximum loan to value is 65%.
It is not currently available to limited companies or partnerships.