Buy to Let Mortgages for Limited Companies

Can I get a buy-to-let mortgage through my company?

If you want to own property through your limited (Ltd) company, you may be wondering how to qualify for the best buy-to-let mortgage (BTL) on the market. Many companies could be declined this type of mortgage due to receiving bad advice, or not discussing their application with an expert beforehand.

The good news is that it’s quite possible to get a buy-to-let mortgage through your limited company, so long as you get the right advice tailored to your specific business needs. Luckily, the experts we work with are experienced in BTL loans.

In this article, we'll go through the following:

• What you need to know about BTL mortgages for limited companies
• What is the criteria for a company buy to let mortgage?
• Buy to let for existing limited companies
• Can a Special Purpose Vehicle (SPV) Ltd company get 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
• Buy to let limited company mortgages for new companies
• Mortgages for existing limited companies
• Buy to let mortgage rates for limited companies
• Is stamp duty payable on a limited company buy to let?
• Moving a buy to let property into a limited company
• How does bad credit affect buy to let for limited companies?
• Speak to an expert about limited company mortgages

For the right advice, call us on 0808 189 2301 or make an enquiry online. The experts we work can offer free, impartial advice that's tailored based on your circumstances and finance goals.

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.

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What you need to know

Many 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, most high street lenders just don't offer these types of mortgages and stick to competing for more straightforward mainstream business. Because of this, borrowers wanting a buy-to-let mortgage through a limited company could end up taking out a personal loan and, as a result, miss out on the benefits of this mortgage type.

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

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

What is the criteria?

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

Many lenders will take the following criteria into consideration:

• An existing special purpose vehicle (SPV) Ltd company
• An existing trading Ltd company (Not an SPV)
• 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

For tailored advice on criteria needed for a limited company buy-to-let mortgage, make an enquiry. We'll then put you in touch with someone.

Existing limited companies

If you already own a Ltd company and are looking to either refinance or purchase a new property, getting a mortgage may be tricky.

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 are a small number of lenders who consider companies trading in other areas. They don't usually accept businesses that trade as something else and want to buy property as well. These would usually be seen as commercial deals and would require specialist commercial buy to let mortgage.

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. 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 and selling own real estate
• 68201: Renting and operating of Housing Association real estate
• 68209: Other letting and 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 are 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-value (LTV) ratio can start from 85% and may vary in rate, with a range available including fixed rates and variable rates, with the most competitive being discount variables (at the time of writing).

The experts we work with are happy to go all the legwork for you in order to find the best deal for your needs. Make an enquiry today to get started.

Existing trading Ltd companies (not SPV)

There's a small number of lenders who consider mainstream buy-to-let mortgages 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 mortgage types 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 to be created 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 and base affordability on the rental yield, with income needing to be at least 125% of the mortgage payment to be acceptable. However, some lenders may require more than this, for example up to 150% or even 180%, depending on the situation.

At least two (or one 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 other factors meet the lender's criteria.

NOTE: If you are a director of a limited company looking for a commercial mortgage to buy/remortgage a commercial property, read our guide on commercial finance.

Directors of limited companies love the specialists that work with us because they use the following criteria…

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

The advantages and disadvantages

For those interested in purchasing property through their limited company with a 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 or additional earners.
• Limited liability: If the company dissolves it is not forced to sell other personal assets (unless guarantees or other security is given).
• Multiple shareholders on title deeds: Can make it easier to manage proportions of ownership and share of profits etc.
• Increased potential borrowing: Other lenders for new personal mortgages may not take these into account as commitments and therefore may 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.
• Potential fees: Consider any increased legal costs and paperwork (likely to include property details and tax returns).
• Complications: A buy-to-let mortgage for a limited company may be slightly more complicated to set up.

Mortgages for Ltd companies on residential and buy-to-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 here 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 mortgage provider can base their lending decision 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 guarantees 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.

Buy to let mortgages for existing limited companies

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 the experts we work with might be able to help you. Make an enquiry to get started.

Buy to let mortgage rates for limited companies

All lenders are different and offer different rates, depending on their lending 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, talk to one of the advisors we work with. They have whole-of-market access, which means they can find the best buy-to-let mortgages for limited companies available. There may even be broker-exclusive deals that aren't available to the general public that could potentially save you even more.

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

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.

If you're unsure how much stamp duty you will need to pay on your limited company BTL mortgage get in touch and the advisors we work with will calculate it for you.

Will I pay a surcharge with limited company buy to let Stamp Duty?

If you're unsure how much stamp duty you will need to pay on your limited company BTL mortgage get in touch and the advisors we work with will calculate it for you.

Will I pay a surcharge with limited company BTL stamp duty?

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

Moving a buy to let property into a limited company

With the changes to the tax rules, transferring a buy-to-let property into a company name 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 downside is that if you already own buy-to-lets and want to transfer them, it will usually mean a sale and repurchase.

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 (among 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 a buy to let expert about limited company mortgages today

If you have questions or want to speak to an expert for the right advice on getting a buy-to-let mortgage through a limited company, call us on 0808 189 2301 or make an enquiry online.

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.