In This Article
Why do people take limited company Buy to let mortgages?
Some investors choose to hold their buy to let properties within a limited company rather than them in their personal names.
This means that the properties are owned by a completely separate entity, with the mortgages being lent to the limited company rather than themselves.
There are several reasons that investors choose this route over personal ownership.
One is to separate their liability as a landlord from themself as an individual. If the landlord is the company, this may remove some personal financial risk in case of a claim against the landlord.
They would, of course, need to fulfil their landlord obligations whether the property is personally held.
Tax is another reason, due to the differences in tax treatment if you own properties within a limited company.
For instance, limited companies may be able to offset more of the interest than an individual can.
This can make the properties more profitable due to a potentially lower tax bill at the end of the year.
Owning properties within a limited company can also be more expensive in terms of interest and mortgage costs and the need to pay an accountant to draft your annual accounts.
Owning BTL properties within a limited company will not be suitable for every investor, so you should take professional tax advice to weigh up the pros and cons of both routes.
It would help if you also talked to a qualified mortgage advisor about the differences in products between personal BTL mortgages and limited company buy to let mortgages.
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Can first time buyers get limited company BTL mortgages?
It can be possible for first time buyers to get limited company BTL mortgages.
Most buy to let lenders require an applicant to already own their own residential property or another BTL property before they issue them with a BTL mortgage.
However, this is not the case with all buy to let lenders.
Some lenders will help an applicant to buy an investment property as their first purchase and hold it within a limited company.
Some BTL lenders have minimum income criteria to qualify for a BTL mortgage. A typical minimum income threshold is £25,000.
This is not the case for all BTL lenders, as some have no minimum income requirement as long as they are happy that the applicant’s financial situation is healthy.
Can you get limited company Buy to let mortgages if you have bad credit?
Getting a limited company BTL mortgage is still possible even if you have bad credit.
Not all lenders will offer mortgages to people with bad credit as some require a clean credit file to assist them.
There are, however, lenders that specialise in borrowers with adverse credit.
Please ensure you tell your mortgage advisor the full details of any adverse credit you have, so they know how to help you.
Once they understand your credit background and your entire financial situation, they can look for a limited company BTL mortgage lender suited to your situation.
You can visit Check My File to sign up for a free trial to know more about your credit history.
Can trading companies get limited company BTL mortgages?
Most limited company BTL mortgage lenders do not lend to trading companies.
Many will insist that the limited company is set up as an SPV (special purpose vehicle) which exists to only purchase and manage its own residential mortgage property.
Lenders look at the SIC (standard industrial classification) code of the company to view what the company has been set up to do.
Most BTL lenders will need a certain SIC code on the company, such as 68100 or 68109, for the company to be acceptable to them.
The good news is that limited company BTL lenders will lend to companies that are trading in their own right (with any SIC code).
This means these companies can hold residential investment properties, renting them out to tenants whilst continuing to trade in their own right.
The lenders that offer this need to understand the company holding these mortgages and will likely need a minimum trading period, for example, two years.
An experienced BTL mortgage advisor can guide you about what lenders are available based on the trading history of your company.
If the company is just an SPV, most lenders are happy with it being a brand new company, with the underwriting being based on the property and the company’s directors.
Is a personal guarantee needed for limited company BTL mortgages?
If you are buying an investment property through a limited company and taking a mortgage, the lender will likely require you to sign a directors guarantee.
A directors guarantee is an agreement that if the company cannot make the mortgage payment, the directors will ensure that the mortgage is paid from their own personal resources.
Often, an SPV is a brand new company with no trading history whatsoever. As a result, the company cannot show experience in paying creditors.
With nothing to underwrite, the lender pays particular attention to the directors, requiring them to make sure that the mortgage is paid regardless of the company’s finances.
It would help if you took professional legal advice when considering signing a directors guarantee so you know the potential impacts that it may have.
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Are limited company Buy to let mortgages more expensive than standard BTL mortgages?
You may find that a limited company BTL mortgage is more expensive than a standard BTL mortgage.
The reason is that most of the lenders that offer limited company BTL mortgage products are specialist lenders.
Specialist lenders usually charge a premium compared to high street lenders.
However, some BTL lenders do not charge more for their limited company BTL mortgage products.
Not all lenders offer limited company products, so it is recommended that you find a mortgage advisor who can tell you your options.
Do you need a certain specialist mortgage broker for limited company BTL mortgages?
You do not always need a specialist mortgage advisor to get a limited company BTL mortgage.
However, as limited company BTL mortgages are usually a bit more complex than standard BTL mortgages, it is recommended that you find a mortgage broker with plenty of experience arranging limited company buy to let mortgages.
The mortgage broker’s understanding of special purpose vehicles and trading companies will be beneficial when arranging your mortgage.
Feel free to ask your broker about their experience and whether they have arranged transactions similar to yours.
Most BTL mortgage Advisors will be able to give you a free consultation before any chargeable work begins.
Many property investors hold their BTL mortgaged properties within a limited company.
There can be benefits to holding BTL properties within limited companies, such as separate liability and different tax rules.
There are also downsides to holding property this way, so it is extremely important to take professional advice from a qualified tax advisor to decide which route is best for you.
When understanding the mortgage products for limited company BTL properties, you should talk to a professional mortgage advisor who can tell you which options are available.
If you would like I NEED ADVICE to match you with a qualified and experienced mortgage advisor; please complete the contact form.