Limited Company BTL – Zero Personal Guarantee Required

What is a Personal Guarantee?

With a homeowner mortgage or personal-name Buy-to-Let, you always guarantee the loans in your name.

However, with Limited Companies being their own legal entity, providing shareholders with "limited liability", this poses a high risk to mortgage lenders. Therefore, a mortgage lender will require the LTD Company BTL Shareholders and/or Directors to sign a Personal Guarantee, holding you personally accountable if you fail to pay the mortgage.

When is a Personal Guarantee required?

Personal guarantees are (mostly) compulsory in most circumstances.

However, exceptions do exist. A select few lenders waive the requirement in exceptional cases where the Loan-to-Value (LTV) ratio is very low (55% LTV or lower). The lender must be confident that the risk is low and, in the event of a default, recoup the funds from the company's assets.

Asking a lender to take a risk by lending you the money, but requesting that you do not personally risk your personal wealth - Always raises questions.

In addition, if you do pass the criteria, you should ask yourself - how much of a premium would you pay for a mortgage without personal guarantees? Ask your Mortgage Adviser for a comparable quote.

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What Does This Mean for You?

The lender requires a minimum deposit as a safety buffer first. However, a personal guarantee is a backstop in case the asset depreciates or payments are missed. The personal guarantee is released upon full repayment to the lender (e.g., by selling the property).

A personal guarantee gets around the "limited liability" that an LTD Company typically offers and puts you, the shareholder/director, on the line for the debt.

Allowing a mortgage lender to assess your circumstances, your income and your assets. It has reassured them that in the event of a default, they can pursue any unpaid amounts from you.

As a general rule, the few lenders that offer "no personal guarantee BTL Mortgages" will require 55% LTV or lower. With significant equity in the property, the lender can be confident they will recover their funds in the event of a default.

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