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Should I use an SPV to expand my buy-to-let portfolio?

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 9, 2021

Today I wanted to share with you a question we received from Antonio who wanted to know more about Special Purpose Vehicle (SPVs) and buying a rental property. Some situations are more complicated than others so I wanted to show my response to Antonia’s question below.

Question:

Hi Pete,

I’m an experienced landlord with four buy-to-let (BTL) properties under my belt. I feel that now is a good time to expand my portfolio. I’m set up as a limited company and applied for my other BTL mortgages the traditional way but I’ve heard there are benefits to setting up a special purpose vehicle (SPV) and buying a rental property through it

Would you recommend that I apply for my fifth buy-to-let mortgage through a new SPV or via my existing limited company?

Thanks in advance,

Antonio, Leicester

Answer:

Hi Antonio,

Thanks for getting in touch. I’d be delighted to help you out but the first thing I would suggest is speaking to a tax advisor. Tax relief is one of the biggest benefits to buying an investment property through an SPV, especially if you’re a higher-rate taxpayer, so you should talk to a professional about the potential tax advantages on offer to you.

If you were to set up an SPV before buying the property, your mortgage deposit can be loaned to the SPV as a director’s loan and offset against the rental payments until the debt has been settled, reducing its corporation tax liability.

Using an SPV could also enable you to borrow more on your next BTL mortgage. As your SPV’s tax liability is considered separate to your personal one, many lenders will likely offer you a more generous rental calculation.

There are other factors you should consider before you decide to set up an SPV. Firstly, you will likely need a broker to get the most favourable interest rates. Rates are generally higher for SPV applications and many high street lenders decline them due to their complexity.

A whole-of-market broker can, however, introduce you to a lender who specialises in SPV buy-to-let deals, which means your chances of a positive outcome will be higher.

Secondly, don’t be surprised if the mortgage lender asks you for a higher deposit (the minimum requirement for a BTL mortgage is usually 15%). This is often the case where portfolio landlords with more than three properties are concerned.

Best of luck with your purchase,

Pete

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About the author

Pete, 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 found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with 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 OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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