Getting a Buy-to-Let Mortgage Through a Special Purpose Vehicle (SPV)
Setting up a limited company to purchase a buy-to-let property is becoming more common and often requires expert guidance. We’ve helped thousands in similar situations, with 4 experts dedicated to Special Purpose Vehicle (SPV) mortgages. We guarantee to get your mortgage approved and find you the best deal. If we can’t and someone else does, we’ll give you £100!*
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Author: Pete Mugleston
CeMAP Mortgage Advisor, MD
Reviewed by: Jon Nixon
Former Director of Distribution
Quick Summary
SPV mortgages are designed for landlords who are buying through a limited company rather than in their personal name. We help customers with this type of mortgage all the time!
Lenders will want the company set up with the right SIC code, usually something like 68209, for letting property, and very few will lend to trading businesses under other SIC codes doing other things – that is considered more commercial lending than a true Buy-To-Let investment (not impossible, just other lenders for it!).
Since the many changes to BTL mortgages and tax treatment, SPVs can offer great tax efficiency and added liability protection for landlords, which is why more investors are choosing to buy through a limited company setup.
Wind back a few years, and SPVs were not widely accepted, but today most (if not all) lenders consider SPVs, especially if you’re an experienced landlord. Just keep in mind that many will want a personal guarantee, and you’ll usually need to provide full company accounts and/or a property portfolio overview, as part of the application.
A special purpose vehicle (SPV) is a limited company (or, occasionally, a trust or partnership) purposefully set up to own and operate investment and buy-to-let property.
Lenders will look at the following key criteria when they assess your application:
- Correct SPV structure and property-related SIC code
- Director with experience in property
- Rental coverage ratio (e.g. 125% + at 5.5%)
- Accountant involvement and clean company accounts
They’ll also want to know the answers to the following questions:
- Is it a new SPV or already trading? If trading, for how long?
- Is the company an SPV for property ownership only, or does it trade as something else too?
- What is the company’s SIC code?
- Are you a first-time landlord or an experienced investor?
- Do you have/will you be purchasing multiple properties through the SPV?
- Do you have an accountant managing your company accounts?
- Where is the capital coming from for the deposits? Do you have evidence of this?
SPVs are popular with buy-to-let property investors because of several key features listed below.
SPVs offer several ways for property investors to reduce their tax bills, particularly for higher—or additional rate taxpayers.
- Profits are subject to corporation tax, currently at 19%, rather than income tax, which can be as high as 46%
- Post-tax profits can be distributed to directors and shareholders as dividends, who can use their £2,000 tax-free dividends allowance
- Landlords can also loan their mortgage deposit to the SPV as a director’s loan and offset profits from rent payments until the debt has been repaid
SPVs offer a convenient way for a group of people to share ownership of a property investment and divide the proceeds. It’s also easy to add someone new as a shareholder, which can help to reduce your capital gains tax or inheritance tax bill in certain situations.
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Can you get an investment mortgage through an SPV?
Yes. Though most major lenders (e.g. HSBC, NatWest, Barclays) do not lend to limited companies, you can get an SPV mortgage by approaching a specialist lender through a broker with experience and a strong track record for arranging SPV mortgages.
How to get an SPV mortgage
You can get an SPV mortgage in just a few simple steps.
Step 1: Register an SPV
It’s essential to set up the SPV before buying the property. Lenders will always need to check the company details before offering an agreement in principle. If you’ve purchased the property as an individual, you’ll have to sell it to the SPV at market value and may need to pay stamp duty and legal fees.
At a cost of £12 plus VAT, it is straightforward to register your SPV with Companies House as you would any other limited company. You can also instruct an accountant or solicitor to do it for you. If you do it yourself, you must take care to select the correct SIC codes for your business activities, for example:
| 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 |
| 68100 | Buying & sell own real estate |
You’ll struggle to get a mortgage if your limited company doesn’t have the right SIC code, as many lenders will not offer a buy-to-let mortgage to a “trading business”.
Step 2: Speak to a mortgage broker who specialises in SPVs
One of the main reasons many look to own property through an SPV is that it may offer you opportunities to maximise your profit margin, so you’ll want to be sure you’re signing up for the best available mortgage deal. Few lenders offer SPV mortgages, so speaking to a broker specialising in this area will help you find a great deal.
We can connect you with an SPV mortgage broker for a no-obligation chat. Enquire online to try our broker-matching service.
Step 3: Make your application
There is additional paperwork involved in applying for an SPV mortgage compared to a personal mortgage, but your broker will guide you through it and ensure that all the details are correct. This will help to ensure that your application is approved as quickly as possible the first time.
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Requirements and eligibility
The main requirement for an SPV mortgage is that you have properly registered your limited company as a special purpose vehicle with Companies House, using the most appropriate SIC code(s).
Other common requirements are around:
- Deposit size. Many lenders require a 25-30% deposit for buy-to-let mortgages, though it is possible to find a mortgage with a 15-20% deposit.
- Portfolio size. Some lenders will only offer portfolio mortgages to limited companies, meaning that your company would need to own three or more properties.
- Number of directors. Some lenders will only lend to limited companies with a maximum of four directors.
Lenders and rates
Lenders that offer mortgages to limited companies include Paragon, Precise Mortgages, Aldermore, Zephyr Homeloans, and Quantum Mortgages, among others.
SPV mortgages are more complicated than personal mortgages and involve additional paperwork, so you should expect the rates and fees to be a little higher (typically between 0.5%-1% above standard mortgage rates).
If you’re considering setting up a special purpose vehicle to purchase a buy-to-let property and would like an idea as to how the mortgage repayments could work out across a range of different terms and interest rates, you can use our calculator as a guide:
Buy-to-Let Mortgage Calculator
Our buy-to-let mortgage calculator can show you how much your mortgage could cost you each month and overall. Simply enter the rental property value, deposit, anticipated monthly rent, interest rate, mortgage term and our calculator will do the rest.
Interest only:
Capital and repayment:
Loan to Value ratio (LTV):
Most lenders won't offer buy-to-let mortgages over a LTV of 80%.
Interest Cover Ratio (ICR):
Most lenders require rental income to be at least 125%-145% of the interest repayments for a buy-to-let mortgage.
Get started with a specialist buy-to-let broker to find out how much they could help you save on your monthly mortgage repayments.
Other considerations
Owning a property through an SPV has some drawbacks compared to individual ownership, so you should be sure you understand these before proceeding.
The major ones are:
- Limited mortgage availability from major lenders (though a broker can help)
- Increased reporting and record-keeping requirements (primarily the obligation to file your company accounts each year with HMRC and Companies House)
- More complex taxation, which you might need expert help to navigate
Get matched with an SPV mortgage specialist
To find the best rate, you should speak to a buy-to-let broker who specialises in SPV mortgages. They will have access to every deal that’s available to you, even if it’s not advertised to the general public.
We can connect you with one of our expert advisors who has the exact experience you need for a no-obligation chat. To get started, just call us on 0330 818 7026 or make an enquiry.
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Pete Mugleston
CeMAP Mortgage Advisor, MD
Pete, a CeMAP-qualified mortgage advisor and an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete successfully went the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained and his love of helping people reach their goals led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.
Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!
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