Limited Company Buy-to-Let Mortgages

Understand limited company buy-to-let mortgages and how a broker can help secure the best rate

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Home Buy To Let Mortgages Limited Company Buy-to-Let Mortgages
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Jon Nixon

Reviewer: Jon Nixon

Director of Distribution

Updated: December 11, 2023

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

December 11, 2023

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).

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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. 

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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.

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.

Enter the value of the rental property here
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A deposit of at least 20% is usually required for a buy-to-let mortgage
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Most lenders will require a deposit of at least 20%
Deposit must be less than the property value
Enter the anticipated monthly rent here
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Enter the mortgage rate, 5.5% is a typical rate currently but this can vary
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Enter the mortgage term, 25 years is the average but lenders can offer shorter and longer terms
years
Borrowing

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.

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:

Rental Yield Calculator

This calculator will show you the rental yield on your buy-to-let property using either the original purchase price, plus associated costs, or the current value. All you need to do is choose which option you want to base your calculation on and your monthly rental premiums.

Input either the original property purchase price or current value to work out the rental yield.
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Gross Rental Yield:

Net Rental Yield:

Now you've worked out what your current rental yield is, why not speak to a broker to see what buy-to-let mortgage/remortgage opportunities are available? With their expertise in this market they'll be able to identify a range of new deals which could reduce your mortgage payments and, as a result, improve your overall rental yield.

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.

Get matched with a buy-to-let mortgage broker

Looking for a broker who specialises in sourcing buy-to-let mortgages for limited companies? Our unique broker matching service can help. We’ll simply take a few details and will match you with the advisor who can accommodate – there’s no fee and no obligation, just the chance to have the expert guidance you need.

We work with plenty of buy-to-let mortgage brokers who specialise in limited company deals, so let us do the hard work for you. Just call us on 0808 189 2301 or make an enquiry to get started.

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FAQs

Yes, in fact interest-only is usually the preferred repayment method for buy-to-let mortgages. However, bear in mind that these deals will typically have lower LTV limits (often around 60%), which means you’ll need to put down a higher deposit.

Yes. Limited company buy-to-let mortgages are available in Scotland and Northern Ireland as well as in England and Wales, offering suitable finance no matter where you are in the UK.

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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 Online Mortgage Advisor of course!

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Pete Mugleston

Mortgage Advisor, MD

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