Buy to Let Mortgages for Limited Companies

Can I get a buy to let mortgage through my business?

People contact us on a daily basis asking about buy to let mortgages for limited companies. Many have been declined a mortgage, usually because the advice they received wasn’t of the highest quality.

The good news is that it’s quite possible to get a limited company buy to let, all you need is the right advice – and the advisors we work with are experts in this area and they’ve helped loads of people get the best deal.

In this article we’ll cover:

• Limited company buy to let mortgages – the good news
• What is the criteria for a company buy to let mortgage?
• Buy to let for existing limited companies
• Can an existing Special Purpose Vehicle (SPV) limited company purchase a buy to let?
• Are there dedicated SPV buy to let lenders?
• Setting up a new property company for buy to let
• The pros and cons of buying a buy to let property through a limited company
• Buy to let limited company mortgages for new companies
• Limited company buy to let for an existing company
• Limited company buy to let rates
• Is stamp duty on a limited company buy to let payable?
• Moving buy to let property into a limited company
• How does bad credit affect buy to let for limited companies?

See this article for residential mortgages for Self-employed directors

This article is about buy to let property.

If you're a business owner/company director and want to find out more information about purchasing a property as an individual using things like salary, dividends and share of retained profits as income then please read our article on company owner mortgages.

Limited company buy to let mortgages – the good news

We see it too often - inexperienced brokers turn away borrowers looking to ring-fence their investment properties in Ltd companies, as it can be difficult to find lenders that accommodate such arrangements.

The truth is, high street lenders just don't offer these types of mortgage and stick to competing for more straightforward mainstream business, so sadly many borrowers preferring to go limited can be sent them down the personal borrowing route and miss out on the benefits as a result.

For many investors with small or large portfolios, the tax benefits of buying property through a ltd company can be significant, especially for higher rate tax payers.

Ltd company mortgages are also great for those that want to buy property as a collective rather than just 2 individuals, and for those who wish to separate themselves from personal liability should things go wrong.

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What is the criteria for a company buy to let mortgage?

Buying property as a limited company is possible depending on the buy to let company structure,

Such as:

• With an existing SPV Ltd company
• With an existing trading Ltd company (Not an SPV)
• When starting up a New ltd company at the time of purchase
• Ltd companies with personal guarantees (PGs)
• Ltd companies without personal guarantees (PGs)
• Up to 85% loan to value (LTV)
• Rental income needs to be at least 125% of mortgage payment
• Minor adverse credit accepted

Buy to let for existing limited companies

If you already own a ltd company and are looking to either refinance or purchase a new property, getting a mortgage can be tough.

Luckily, the advisors we work with have access to the whole market and regularly arrange buy to let through limited company mortgages for new and existing clients - if you want to be one of them get in touch and a specialist will be happy to help.

Typically, most limited company buy to let mortgage lenders are only willing to approve companies that purely deal in property - however there is a small number of lenders who consider companies trading in other areas. They don't usually accept businesses that trade as something else that want to buy a property as well - these would usually be seen as commercial deals and would require specialist commercial finance.

Can an existing SPV limited company purchase a buy to let?

Companies that trade only in rental property are known as Special Purpose Vehicle (SPV) limited companies and they can be classified in different ways by lenders, according to the Standard Industry Classification (SIC) code that the company is registered at companies house.

Typically these include:

• 68100 - Buying & sell own real estate
• 68201 - Renting & operating of housing association real estate
• 68209 - Other letting & operating of own or leased real estate
• 68320 - Management of real estate on a fee or contract basis

For those classed as SPVs, getting a BTL is now more straightforward than for firms trading as other SIC categories, and there are several options, depending on the situation.

Are there dedicated SPV buy to let lenders?

There's several main players in the industry nowadays, and with the high street lenders that used to throw money in that direction now only offering finance to existing customers you'll need to go through a specialist broker to access them.

The acceptable loan to values start from 85% and vary in rate, with a range available including fixed rates and variable rates, and the most competitive being discount variables (at the time of writing).

Existing trading Ltd companies (not SPV)

There's a small number of lenders who consider mainstream Buy to let lending to Ltd companies that already run as a trading business. This business does not necessarily need to be trading in property either. Typically, you need a 25% deposit for these types of mortgage because the number of lenders available is restricted.

Setting up a new property company for buy to let

Newly registered limited company mortgages are also possible based on current criteria with a few select lenders. Basically, the ltd company would need creating at the time of application and would be best being registered with companies house as an SPV (see definition above).

Lenders will start lending at 85% Loan To Value (LTV) and base affordability on the rental yield, with income needing to be at least 125% of the mortgage payment to be acceptable, some other lenders require more than this, up to 150%, and others 180% depending on the situation.

At least 2 (or 1 if in sole name) of the directors will need credit scoring to show that the company is creditworthy as it will have no history of its own. The lender will also need to verify the directors income to establish there is a level of underlying affordability. If the directors have any adverse credit it still may be possible to obtain the finance if it meets the lenders criteria.

NOTE: If you are a director of a limited company, looking for a commercial mortgage to buy/remortgage a commercial property visit here.

Directors of limited companies love the specialists that work with us because…

• No minimum income required
• 1 years accounts ok
• 2 years accounts ok
• No income at all needed for experienced landlords

The advantages and disadvantages of buying a buy to let property through a limited company

Often we receive enquiries from directors and would-be directors, asking ‘can I get a mortgage with a ltd company?’ And the short answer is yes, depending on what it is you’re looking to do.

For those interested in purchasing property with a ltd company buy to let mortgage, there are certain advantages and disadvantages to consider.

Advantages:

• Tax – can be seen as more tax efficient than personal income - especially for higher rate earners.
• Limited liability – if the company dissolves it is not forced to sell other personal assets (unless guarantee’s or other security is given).
• Multiple shareholders on title deeds can make it easier to manage proportions of ownership and share of profits etc.
• Other lenders for new personal mortgages may not take these into account as commitments and therefore allow increased personal borrowing.

Disadvantages:

• Limited number of lenders to choose from = more restrictive criteria and choice of products, which may mean higher rates/costs and less value on investment.
• Potentially increased legal costs & paperwork.
• Slightly more complicated process to set up.

Mortgages for Ltd companies on residential and buy let investment properties can be a tricky thing to source, as not all lenders (in fact very few when you look at the whole market) are happy with such a setup.

*We recommend that you speak to a tax specialist such as an accountant to assess the advantages and drawbacks of using a limited company for purchasing a property.

Buy to let limited company mortgages for new companies

The main issues surround the risk to the lender. If the mortgage is for a completely new company, then there will be no trading history or track record of success that the lender can base their decision to lend on.

Without any credit history it’s hard for the lender to establish the chances of the loan being repaid! In these circumstances, the lenders that do consider such applications often ask for personal guarantee’s from the directors, so that should the mortgage not be repaid the directors become personally responsible.

They may also request additional security such as equity in other properties or a larger deposit etc.

Limited company buy to let for an existing company

If the company already has a trading history and proven experience with renting properties it is easier for a lender to approve an application, although certain lenders may still ask for personal guarantees.

The added consideration here would be if the company already owns multiple properties, because certain lenders do limit the number and total amount of mortgages each borrower or company can have.

As ever though, there are lenders that accommodate professional landlords with mortgages for large property portfolios, and we have access to them all.

Limited company buy to let rates

All lenders are different and offer different rates dependant on their criteria and your personal circumstances. An existing Ltd buy to let company with a good track record in managing rental properties profitably, will be looked on more favourably than a new company.

For the best rates you need to talk to one of the advisors we work with, who have whole of market access, which means they can find the best buy to let mortgages for limited companies, there may even be broker exclusive deals, not available to the general public, that could potentially save you even more.

Is stamp duty on a limited company buy to let payable?

Yes. Any purchase of a residential property is subject to stamp duty and there is a sliding scale based on the value of a property that determines how much sales tax you will have to pay.

Limited company buy to let stamp duty surcharge

There is a 3% surcharge applicable to the total purchase price on residential properties, such as buy to let.

Moving buy to let property into a limited company

We are often asked which is best, buy to let company or private ownership?

With the changes to the tax rules, transferring a buy to let property into a company is becoming an increasingly attractive proposition for many landlords.

The changes include loss of mortgage interest tax relief and wear and tear for landlords with the property in their own name.

The good news is that these changes don’t apply to buy to lets owned by a limited company, because the properties are seen as a business, so expenses can be written off for tax purposes.

The down side is that if you already own buy to lets and want to transfer them, it will usually mean a sale and re-purchase.

This could mean incurring a range of additional costs including:

• Capital gains tax
• Stamp duty (including the surcharge)
• Legal fees
• Valuation and mortgage fees

There are exceptions to this in some scenarios, where if you can evidence being a portfolio landlord is your full time role, and you own enough property (amongst some other things) you may be eligible for relief.

*We recommend that you speak to a tax specialist such as an accountant to assess the advantages and drawbacks of using a limited company for purchasing/managing buy to let properties.

How does bad credit affect buy to let for limited companies?

If there’s previous bad credit showing on your credit file, then this can limit the options to you in purchasing a limited company BTL.

Below is a list of potential credit issues that may affect your ability to obtain a mortgage:

• Adverse credit overview
• Low credit score
• Mortgage Arrears
• Defaults
• County Court Judgements (CCJs)
• Individual Voluntary Arrangements (IVAs)
• Debt Management Plans (DMPs)
• Bankruptcy
• Repossession

Some lenders are happy without the bad credit showing as being satisfied as long as they’ve been registered over a certain time.

Talk to an expert in buy to let limited company mortgages today

If you have questions or want to speak to an expert for the right advice on buy to let through a limited company, call Online Mortgage Advisor today on 0800 304 7880 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances.  – We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating