In This Article
What is a limited company holiday let mortgage?
A limited company holiday let mortgage is for properties that are to be let on a short-term basis and held within a limited company.
The limited company would usually be an SPV (special purpose vehicle), meaning that the company is set up only to purchase, hold and manage its own investment properties.
Lenders would look at a company’s SIC code (standard industrial classification), which tells them what a company has been set up to do. Acceptable SIC codes usually include 68100 and 68109.
If the company were trading in any other way, the application would be outside of criteria with most mortgage lenders. However, some mortgage lenders can still offer holiday let mortgages to trading limited companies.
Holiday let mortgages are different to standard buy to let mortgages as they are arranged on the basis that tenants will be coming and going regularly rather than an extended tenancy agreement, such as six months to one year, which you would usually have on a buy to let property.
Holiday let investors use portals such as Airbnb for marketing their holiday let Airbnb property.
If you are considering taking a limited company holiday let mortgage, you should seek expert advice.
Holiday let, and limited company mortgages are specialist areas, so a mortgage broker’s experience will prove very useful to you.
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Why would an investor take a limited company holiday let mortgage?
There could be several reasons a holiday let property investor would choose to hold their property within a limited company rather than having it in their personal name.
One reason could be separating the ownership and the business from them as an individual.
This may give them a layer of protection in case of an adverse event at a property the owner has no control over.
Separating ownership to a new entity may reduce risk in certain circumstances.
Another reason could be tax treatments. Limited companies have different individual rules, so it may be more tax efficient to hold the property within a limited company.
This is not always the case, so taking bespoke expert tax advice from a qualified person is always highly recommended before choosing your route.
There may also be other advantages, such as being able to issue shares of the company to family members allowing them to receive income from the properties.
There are usually positives and negatives to both personal ownership and limited company ownership, so make sure you do your due diligence by taking professional advice. Hence, you know the direction that you should go in.
Limited company holiday let mortgages could be more expensive than a personal holiday let mortgages, so consult a qualified mortgage advisor that can tell you the differences in rates and fees.
Working with a mortgage advisor and a tax advisor from the beginning should help you to make the correct decision for your individual situation.
Can a first-time buyer get a limited company holiday let mortgage?
Most mortgage lenders would not offer a limited company holiday let mortgage to a first-time buyer.
This is because it is a specialist product, and many lenders would want to see applicants already own a property before purchasing a limited company holiday let property.
Fortunately, there are many lenders in the mortgage market, so first time buyers should usually have options available to them.
If they meet the criteria of the few lenders that can consider first time buyer holiday let investors, this will allow them to take a holiday let mortgage to purchase their first property.
Some lenders will allow these first time buyers to hold the within a limited company.
Lenders will need to understand the first-time buyers’ total income and outgoings, source of deposit, full details of the property, expected rent, the applicant’s indebtedness and credit history.
First-time buyers wishing to buy a limited company holiday let property should look for a mortgage advisor with experience in these transactions.
Most mortgage Advisors will be willing to offer a free consultation so you know your complete options.
Can you get a limited company holiday let mortgage if you have bad credit?
Getting a limited company holiday let mortgage may still be possible if you have had bad credit.
Some mortgage lenders offering holiday let mortgages will require the applicants to have a clean credit history before offering them a holiday let mortgage.
This is not the case for all lenders, as some mortgage lenders specialise in applicants with adverse credit.
Adverse credit is diverse, as many different credit issues could be considered bad credit.
For instance, this list includes missed payments, arrears, county court judgements, defaults, debt management plans, individual voluntary arrangements, and bankruptcies.
Depending on the level of bad credit and whether the application meets the remaining criteria for a limited company holiday let mortgage, these applicants should still have options available.
If you have adverse credit and are considering buying a limited company holiday let property, make sure you tell your mortgage advisor the full details of your adverse credit so they can search for the correct lender accordingly.
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Is a limited company holiday let mortgage more expensive than a standard holiday let mortgage?
In some cases, limited company holiday let mortgages will be more expensive than a personal holiday let mortgages.
This is because some lenders offer personal holiday let mortgages but don’t offer them to limited companies.
This may result in you needing a more specialist lender with higher rates and charges on the products.
Some mortgage lenders can offer you a holiday let mortgage in either your personal name or through a limited company without charging a premium.
Lenders’ products change regularly, so where a product may be best one week, it may not be best the next week.
A mortgage advisor will be able to tell you what products you may qualify for, in both your personal name or in the name of a limited company.
This will tell you whether you will be paying a premium for holding the holiday let property within a company.
If this is the case, working with a mortgage advisor and a tax advisor, you will be able to calculate whether you are best to do this or not.
Would you need a specialist mortgage broker for a limited company holiday let mortgage?
If you plan on buying a holiday let property with a mortgage and holding it within a limited company, this is a specialist area.
It is recommended that you find a mortgage advisor with experience in the holiday let mortgage market and property purchases through limited companies.
Some mortgage Advisors stick to areas they are comfortable with and arrange regular transactions within.
For instance, you may get a mortgage advisor with lots of knowledge and experience in shared ownership residential mortgages but minimal knowledge in limited company mortgages due to not having arranged many.
Make sure that you ask your mortgage broker what their experience is and whether they have arranged transactions similar to your own in the past.
This is to ensure that they are up to date with the current lenders that may be able to help you.
Conclusion
Holding a holiday let property within a limited company may be your best route.
This is because owning a property in a separate entity could benefit you and may even benefit you due to the different tax treatment.
However, it will not be suitable for everybody, so make sure that you take professional tax advice before choosing your route. Hence, you understand the pros and cons of both limited company ownership and personal ownership.
You may still be able to get a limited company holiday let mortgage even if you are a first time buyer or have had bad credit.
In all scenarios, you should look for an experienced mortgage advisor that can tell you your full options.
Most mortgage Advisors will give you a free consultation, so you know whether to proceed or not.
If you would like I NEED ADVICE, to match you with an experienced, regulated mortgage advisor. Please complete the contact form.
The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.
If you are seeking advice about a mortgage, you should consult a qualified professional.
