RLA : RPI : Landlords offered renovation finance

News from the Residential Property Investor, the bi-monthly magazine for RLA members

other artilces from the April / May 2001 issue

Landlords offered renovation finance - April / May 2001

Capitalising on the tax breaks announced in Gordon Brown's March Budget, buy to let mortgage lender Paragon has launched a lending scheme aimed at experienced landlords wanting to buy and renovate rundown properties.

Renovation loans can be made available at any stage through the redevelopment, with interest charged at a premium on Libor.

Mortgage repayments do not start until the work is completed and the property is habitable. The outstanding loan repayments are then merged with the mortgage.

Applications will only be considered for buy to refurbish loans from landlords able to prove their experience in the residential renting sector and a sound track record with buy to let mortgages. They must have also been involved in similar redevelopments in the past.

The Budget included announcement of abolition of stamp duty in deprived areas (details still to be revealed), tax relief for renovation of properties above shops and a cut in VAT for work carried out to convert houses into flats and renovating property that has been uninhabited for three years or more (see Brown's conversion, below).

* A change to the tax rules announced three years ago and denying residential landlords the right to set a pro portion of improvement costs against tax will come into effect from April.

Property repairs are generally an allowable expense but improvements are not. However, until now the Revenue has allowed landlords to treat the notional 'repair' element of any improvement as allowable. The classic example is installation of double glazing to replace old and worn window frames. In such instances there is both an element of repair and of improvement.

But from April none of the cost can be set against rental income.

other artilces from the April / May 2001 issue