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When buying a property to rent out in a limited company, you will often need a Limited Company buy-to-let mortgage.
A minority of Mortgage Lenders offer Limited Company buy to let mortgages. These mortgage products may differ from standard buy-to-let mortgages.
Bespoke Finance can help you register a Limited Company (also known as an SPV), or your accountant. It is essential to register the correct SIC Codes and have a bank account in the company open for the mortgage direct debit.
As with a standard mortgage, they will base the lending on your personal circumstances. So a new SPV Company with no assets or income, set up on the same day, for example, is excellent. They will require personal guarantees from the directors/shareholders.
You can lend money to the company for the deposit from your personal assets.
Mortgage Lenders prefer companies that will only own and rent property. They dislike trading companies doing other activities.
Landlords with more substantial deposits can enjoy better mortgage products and rates.
The minimum deposit is 15% of the property value (85% LTV). The mortgage rate can be from 2% higher than those landlords who can invest 20% deposit (80% LTV).
The rental amount can limit the maximum loan achievable.
Landlords can gift or lend the deposit money to the Limited Company for the deposit.
New regulations limit borrowing based on the rent deemed achievable by the lender's valuer. The minimum is assessed at a rate of 5.5% ensuring a 125% coverage.
As such for a £100,000 mortgage you would need at least £572 rent. As a rough simple calculation at a mininimum for every £1,000 borrowing, you need £5.72 rent.
Limited Company Buy-to-Let often enjoys lower rental stress tests compared to buy-to-let purchased in your personal name.
The trend for buy-to-let mortgages has been to go for Interest Only.
Whatever your plan our mortgage advisers can obtain for you repayment, part-repayment, interest only and offset buy-to-let mortgages.
The Financial Conduct Authority (FCA) does not regulate most types of buy-to-let mortgages. The Financial Conduct Authority does not regulate mortgages Limited Company Buy to Let Mortgages.
You must pay Stamp Duty Land Tax (SDLT) if you buy a property, the amount is a percentage of the value of the property. As a Limited Company, you will pay the higher amount SDLT + 3%.
You can check out our calculator for more information and conveyancers will discuss with you the exact SDLT you will have to pay.
Yes - when buying property in an SPV Limited Company the directors and shareholders are often required to sign personal guarantees.
The personal guarantee requirement is mostly compulsory, except in exceptional cases where the Loan to Value (LTV) is very low. In such cases, a charge on the company as a whole may be taken - through this is a rare occurrence.
Asking a lender to take a risk by lending you the money, but requesting to not to give those same guarantees personally. As you imagine is not looked upon lightly.
A personal guarantee is a backstop - if the asset depreciates or missed payments. The lender has the equity (minimum 15% Deposit) as a safety buffer first. Therefore offering a personal guarantee may be seen as a medium risk. With the personal guarantee released on full repayment to the lender (such as selling the property).
It's not generally more difficult in term of criteria than purchasing in a personal name. In some instances (such as rental stress tests) it may be easier to buy in a Limited Company.
The number of mortgage products is restricted compared to the personal name, though it has been getting larger.
Mortgage Lenders do not like to lend to Trading Companies. They see the other activities as a potential risk.
The preferred method is a Special Purpose Vehicle (SPV).
You can obtain BTL Mortgages in a Trading Company, but your mortgage product options are limited.
A Special Purpose Vehicle (SPV) is a Limited Company incorporated at Companies House as a Buy to Let Holding Company.
The lender requests this Company’s activities be limited to undertake property rental activities only.
If the company, for example, sold Widgets as well; that would not be an SPV but a trading company.
A LTD Company is a “separate legal entity” which obtained finance to purchase the property in its name.
You will have a personal guarantee to the bank, that does not mean you have personal ownership rights.
So the Company owns the Property, but you will hold the Company based on the % of shares.
Each shareholder will need to be named on the application, provide details and a personal guarantee.
You can be 100% shareholder.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
Bespoke Finance is a trading style of Bespoke Finance Direct Limited.
Bespoke Finance Direct Limited is authorised and regulated by the Financial Conduct Authority (No. 715805) to transact regulated mortgages.
The FCA does not regulate some investment mortgage contracts.
Bespoke Finance Direct Limited is registered in England and Wales (No. 09623432) at 31 Church Lane, Pudsey, LS28 7LD.
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