Limited Company Buy-to-Let Mortgages

If you’re looking to buy a rental property through a limited company you’ll need a specialist mortgage to suit. With the help of an experienced mortgage broker, these types of home loans – and the lenders who offer them – are much easier to find.

Here’s everything you need to know about securing buy-to-let mortgages for a limited company, and where you can find the right support to get the best terms available.

Can you get a buy-to-let mortgage through a limited company?

Yes! These mortgages are becoming increasingly popular as landlords look to navigate the various tax and rule changes that have come into force in recent years. However, they’re not as common as residential buy-to-let (BTL) mortgages typically only available through specialist lenders. As a result, sourcing expert advice through an experienced broker from the outset is a shrewd move.

What are the benefits of buying through a limited company?

The main benefit is the reduced tax burden. Thanks to Government changes to tax relief it can be more difficult for individual landlords to build a portfolio and turn a profit, and so many are changing to a limited company structure to remove some of the obstacles. 

Essentially, it means landlords will pay corporation tax on the rental profits, rather than income tax on the rental income, which they’d have to do if the property was privately-owned. This could result in a higher tax bill, particularly for higher earners who could pay up to 45% tax on their income, whereas corporation tax is currently (August 2022) set at a flat rate of 19%. So, getting a buy-to-let mortgage as a limited company could become an increasingly viable – and potentially more profitable – option.

It can also make it easier to manage ownership of properties if there are multiple shareholders involved, and it limits your own liability as well – if the company were to fail, you wouldn’t have to sell your own assets as it’s an entirely separate entity (unless you offered personal guarantees).

How a buy-to-let broker can help

This is a complex area of borrowing, and having a broker on your side can be vital – particularly if you’ve never sought a buy-to-let mortgage through a limited company before. 

The expert brokers we work with will know exactly what you need to do to prepare an application as a limited company, reducing the possibility of a rejection. Better yet, they’ll be able to help you find the best rates, potentially saving you money too. 

Their help can be particularly invaluable if you’re new to the buy-to-let market, or perhaps an experienced landlord who’s simply looking for the best deal. Make an enquiry to see the difference a specialist broker can make. 

Rules and eligibility criteria

Typically speaking, these mortgages are only available to landlords who have set up a limited company as a special purpose vehicle (SPV) – that is, one that’s designed solely for the purpose of buying, selling or letting out property – though some lenders may accept other company structures. Landlords who have set up this kind of company won’t be able to borrow through a standard BTL mortgage.

Other limited company buy-to-let mortgage criteria can include:

• Higher deposit requirements. Deposit requirements will often be harsher than for residential BTL deals, with many lenders capping the loan-to-value (LTV) at 85% and often even less. High street lenders in particular may restrict lending to 70% LTV, or lower for those seeking interest-only deals.
• Personal guarantees. Some lenders will ask for personal guarantees from company directors, particularly if the LTV is above 50%.
• Rental income. Eligibility is closely linked to rental income, which will normally need to equate to at least 125% of the mortgage payment.
• Personal income requirements. Although rental income is normally the key driver of any BTL mortgage application, limited company mortgages may expect landlords to have a separate personal income which will be included in the credit assessment (though in some cases this can be personal savings rather than minimum income).
• Portfolio size. Although many landlords choose to opt for limited company mortgages to increase their portfolio, some lenders have a maximum number of properties (or maximum value) that can be included. At the other end of the scale, some ltd company buy-to-let mortgage deals are only open to portfolio landlords.
• Age. As with all mortgages, age will always come into it, with options becoming more limited the closer a borrower gets to retirement. That said, some lenders in this sector won’t set a maximum age, provided the landlord is experienced and the LTV is low.
• Property type. Some lenders will only lend on standard properties and will exclude non-standard construction types, whereas others will have fewer restrictions. There may be additional rules for houses of multiple occupation and alternative letting arrangements (such as housing association or local authority), but this will depend on the lender.

What interest rates to expect

Interest rates are in flux at the moment which means it can be difficult to say what you should expect, though currently, limited company buy-to-let mortgage rates start at around 2.80% for a variable rate deal but can be as high as 6.29% for a long-term fixed rate (as at August 2022). They can often be more expensive than for standard BTL deals, but this isn’t always the case, with some lenders offering the same rates to both sectors.

Working out your rental yield

Rental yields are the amount of cash your property generates, calculated as a percentage of its value, and broken down into net and gross values. 8% is generally regarded as a ‘good’ gross rental yield for a buy-to-let investment property. To calculate your rental yield, simply use our calculator below:

Which lenders will consider your application?

You’ll likely need to approach specialist lenders for this kind of mortgage, as few high street or mainstream lenders operate in this space.

There are a few exceptions to this, with some building societies in particular able to consider buy-to-let mortgage applications from limited companies (such as Kent Reliance, Vernon Building Society and Tipton Building Society) as well as smaller banks (including Aldermore, Shawbrook Bank and Paragon), though with the market currently so volatile, bear in mind that this is subject to change.