Mortgages for limited companies
Published 2nd April 2018
Buying a house through a Ltd company
IMPORTANT: This article contains information about purchasing property through a limited company that you own. 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 visit our article on company owner mortgages.
Buying property as a limited company is possible in the following scenarios:
- 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 125% of mortgage payment
- minor adverse credit accepted
You CAN get a mortgage as a ltd company - fact
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 are lead 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.
Mortgages for existing ltd 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 ltd 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 Ltd company 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.
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 under 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
SPV limited company 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.
Buying property with a new ltd company
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 125% of the mortgage payment to be acceptable.
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 Pros and Cons of Ltd company mortgages
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.
- 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.
- 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.
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 as 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 mortgages 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 of £ 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.
Make an enquiry by clicking below for advice from a Ltd company mortgage specialist. If you’re having trouble finding a mortgage lender that accepts Limited companies – let us know! If you require immediate assistance please give us a call.