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Limited Company Buy to Let Mortgages

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    The figure quoted gives you an indication based upon the likely rent being achieved, the actual borrowing may be limited to 80% of the price or value of property.

    Please call us on 0330 0945876 or submit your details below and one of our Buy to Let experts will contact you.

    You may be able to borrow: 0

    The figure quoted gives you an indication based upon the likely rent being achieved, the actual borrowing may be limited to 80% of the price or value of property.

    Please call us on 0330 0945876 or submit your details below and one of our Buy to Let experts will contact you.

    You may be able to borrow: 0

    The figure quoted gives you an indication based upon the likely rent being achieved, the actual borrowing may be limited to 80% of the price or value of property.

    Please call us on 0330 0945876 or submit your details below and one of our Buy to Let experts will contact you.

    You may be able to borrow: 0

    The figure quoted gives you an indication based upon the likely rent being achieved, the actual borrowing may be limited to 80% of the price or value of property.

    Please call us on 0330 0945876 or submit your details below and one of our Buy to Let experts will contact you.


    For more information and advice, please contact us on 0330 0945876 or complete the form below.

    Limited Company Buy to Let mortgage Advice

    You can choose to purchase and manage your Buy to Let property either as an individual or through a limited company – the decision will affect the revenue you can expect, and which option might be best for you will be down to your individual circumstances.

    Recent changes to the taxation rules around tax relief on mortgage interest on Buy to Let properties, as well as the increase in Stamp Duty on second homes, has brought many landlords to the conclusion that running your Buy to Let business as a limited company could be the better option financially. Here, we’ll run through the ins and outs of getting a Buy to Let mortgage as a limited company.

    What is a Limited Company Buy to Let Mortgage?

    Changes to the tax relief on Buy to Let mortgages and Stamp Duty in 2016 made growing a property portfolio generally more expensive for most landlords, and you may have considered registering your Buy to Let business as a limited company. Using a limited company allows you to avoid losing out on tax relief and structure your income in a more tax-efficient way, and while there are a range of pros and cons involved, many people are choosing to change how their business is set up and register in this way. So, it’s important to consider the aspects of a limited company Buy to Let mortgage.

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    The fact is that a limited company Buy to Let mortgage is almost identical to the conventional Buy to Let mortgage that you have probably taken out as an independent landlord, but the important difference lies in how they assess your suitability for the loan. Mainstream lenders have typically shied away from lending a mortgage to a limited company, as the level of perceived risk is higher than that of lending directly to an individual. With most limited companies being run by solo self-employed landlords, it’s seen as more likely that the business may fail, and so finding a limited company Buy to Let mortgage has often been a tough process.

    However, as more and more landlords are choosing to structure their business in this way, the growing demand for limited company Buy to Let mortgages has encouraged the market to shift somewhat, and more providers and products with competitive deals have entered the market. These specialist lenders take a broader view of your Buy to Let limited company and will consider many other aspects of your wider circumstances, taking into account your personal financial history and your personal income in order to get a realistic assessment of your suitability for a Buy to Let mortgage.

    Limited Company Buy to Let Mortgages Information

    The growing popularity of Limited Company Buy to Let

    Since the new rules regarding Stamp Duty and tax relief on mortgage interest came into place, we have seen a rapid increase in the number of Buy to Let mortgage applications from limited companies created by landlords. Property investors are often using this corporate structure to take out loans as a way to counteract the increased costs due to the new rules, taking advantage of the tax efficiencies associated with income from limited companies – especially those in the higher rate tax bracket, or have been pushed into the higher rate by the changes.

    What are the benefits of this approach?

    You don’t have to have a big portfolio of properties to benefit from setting up to your Buy to Let business as a limited company. Even if you have just an individual property, it means that all the income goes into the company and you will be due to pay corporation tax on the profits made. If you can leave all the profits in the company, this will be the only tax you will pay on that income, which can represent a significant saving compared to the rental revenue being viewed as all persona income.

    Is this type of mortgage hard to find?

    It is definitely much easier now than in previous years. As the demand for limited company Buy to Let mortgages has increased, so has the range of products available and the number of lenders willing to offer them.

    As a specialist mortgage broker with many years of experience in dealing with niche-market products, we will know exactly which lender will be able to offer you the right deal for your circumstances, and can offer guidance to give your application the best chance of success.

    Can I get a Limited Company Buy to Let Property?

    Yes – anyone is able to use a limited company to purchase and run a Buy to Let property. The only obstacles will be the criteria stipulated by each specific lender, and as this kind of mortgage is more specialist, the number of options open to you will be fewer than if you were applying for a Buy to Let mortgage as a private individual.

    What are the criteria for a Limited Company Buy to Let Mortgage?

    Generally, the criteria imposed by lenders for obtaining a limited company Buy to Let mortgage are very similar to those for a personal Buy to Let application. The lender will assess the anticipated rental income as well as the property itself in the same way, and will make a mortgage offer to the applicant of typically between 75%-85% of the property’s value, depending on the actual or provisional rent charged.

    When using a limited company, you will have to set it up with a specific Standard Industrial Classification (SIC) code, which will stipulate that the company can only perform the activities of buying and renting property. The codes applied will be:

    • 68100: Buying and selling own real estate
    • 68209: Other letting and operating of own or leased real estate
    • 68320: Management of real estate on a fee or contract basis

    Advantages of a Limited Company Buy to Let?

    As we discussed above, the main advantage of using a limited company to run your Buy to Let business is in tax efficiency. Any money you draw out of the business will be viewed as personal income and taxed at the prevailing rate, while any profits left in the business can be used for refurbishments, fees or further property acquisitions with the remainder subject to the lower corporation tax.

    Running a Buy to Let property business using a limited company has surged in popularity in recent years. Changes to the tax rules in 2017 meant that landlords are only able to able to claim tax relief on mortgage interest at the basic rate of 20%, even if they are a higher rate or additional rate taxpayer, paying 40% or 45%. This could have a significant negative impact on some landlords’ overall income.

    However, in the same year that these changes were introduced, the government also reduced corporation tax rates to 19%, and they are set to come down again to 17% in 2020. So, many landlords are choosing to run their Buy to Let property business as a limited company as a way to possibly reduce their tax exposure.

    You should remember that there are other liabilities to consider, such as capital gains tax on the increase in a property’s value when it is sold, so you are advised to speak to a qualified chartered accountant or tax advisor about your long-term plans for your property business before you set up as a limited company. Whichever route you take, either as a personal landlord or limited company, it’s worth making the decision at the outset, as you are likely to incur several other costs for switching ownership of properties in terms of legal fees and tax liabilities if you decide to restructure your business later

    Disadvantages of Limited Company Buy to Lets

    It might be slightly more complicated to set up a Buy to Let mortgage for a limited company than for a private individual. However, with the right preparation, undertaking a full review and having an open discussion about your current circumstances and objectives, we should be able to identify and process an application for the right mortgage to meet your needs.

    There are not that many Buy to Let mortgages for limited companies available on the current market, and not all lenders are happy to lend to all borrowers using this structure. This means interest rates on these products are usually higher than for a standard Buy to Let mortgage, but with the demand for limited company Buy to Let mortgages rising, they might become more competitive.

    Landlords using limited companies to get Buy to Let mortgages will face additional administration costs, such as the preparation of accounts and company/corporation tax calculations for HMRC, registering at Companies House, legal fees and costs for annual auditing if applicable. It could also be that your accountant will charge higher fees for drawing up limited company accounts. You should check with them to find out their policies.

    What is a Special Purpose Vehicle (SPV) for Buy to Let?

    In the mortgage industry, a Special Purpose Vehicle (SPV) is a limited company set up for the sole purpose of buying and administering Buy to Let properties – in effect, a limited company with restricted trading. An SPV is a way for landlords to ensure their income is as tax-efficient as possible.

    Can I set up a new SPV to purchase a Buy to Let Property?

    Yes, it is possible for anyone to set up a new SPV to buy a Buy to Let property, there are no real barriers. The question should be: would an SPV be the most suitable strategy for your individual situation? A conversation with one of our expert specialist advisors would be able to shed light on the best route for you, but you should also consult your accountant and possibly obtain legal advice to find out for sure if an SPV is the best idea for your business.

    As long as your new SPV is established with the correct Standard Industrial Classification (SIC) code, then mortgage lenders should find it suitable to consider for a mortgage application.

    During the actual mortgage application, much like for a normal residential mortgage, the company director(s) will be subject to the lender’s credit scoring test (which is always measured according to their own set of criteria), as your SPV will be a new company and as such will have no credit history of its own to take into account. The director(s) will also need to show proof of private income to establish an underlying level of affordability.

    SPV or a Trading Limited Company?

    SPVs (Special Purpose Vehicles) are limited companies set up and designed for one purpose: to administer all the financial activities and cash flow around your Buy to Let property business. As with any other limited company, you can draw a nominal income, which would be declared for personal income tax reasons, and retain the rest of the profits within your SPV to use for property maintenance, renovations and possibly reinvested in expanding your portfolio.

    If your limited company starts to receive income and/or assets from other sources, then it will be considered a Trading Company. It is worth noting that many mortgage lenders will only be willing to extend a Buy to Let mortgage to an SPV, as introducing other business interests, income streams and channels for possible expense into your company could be perceived as making it a higher risk. However, as with every aspect of the mortgages market, there are some lenders who are willing to lend to Trading Companies – they will simply carry out a suitable assessment of your affordability rating.

    Any other considerations in setting up an SPV?

    Your SPV does not have to be a new entity – you can change an existing trading company into an SPV by stipulating it will now only be used for your Buy to Let property business, or it can be a new company especially created for this purpose with no prior trading record. It should be noted that some lenders will actually prefer the latter, as it dispels any potential risks (however small or imagined) that the company may carry from any previous trading activity.

    The lender’s assessment criteria to obtain a Buy to Let mortgage with vary from one lender to the next. Many will want to take the director’s personal financial history into consideration, and will require the director to personally guarantee the loan.

    You might think the process to setting up an SPV would be a bit of a rigmarole, but it is surprisingly straightforward and inexpensive to create a new company entity or buy an existing limited company to use as an SPV going forward. In the majority of cases, it is possible to simply register your company at Companies House online at a cost of only £12, and the process should be complete in 24 hours. Your accountant could also do this on your behalf.

    To trade as a Buy to Let business and obtain a mortgage under this structure, your company will need to get the appropriate Standard Industrial Classification (SIC) code for its economic activities, which will stipulate the kind of business your company will conduct. Most lenders will require your SPV to have the correct SIC for performing the activities of buying and renting property, with the appropriate codes being:

    • 68100: Buying and selling own real estate
    • 68209: Other letting and operating of own or leased real estate
    • 68320: Management of real estate on a fee or contract basis

    Can I get a Limited Company Buy to Let Mortgage with Bad Credit?

    It may be more of a challenge, and you might have to do more legwork, but it is indeed possible for someone with bad credit to obtain a Buy to Let mortgage with a limited company. The lender will apply their own criteria and take into account the applicant’s current financial situation and ability to make repayments, as well as the anticipated rental revenue of the property, in order to come to a judgement on the mortgage’s affordability.

    Any adverse credit event is likely to have some impact, although a few missed payments on a store card three years ago will carry far less weight than a mortgage default in the last 12 months. It should still be possible to obtain a mortgage if you are able to meet all the lender’s other criteria. If you talk to one of our specialists Buy to Let or Bad Credit advisors, they will be able to assess your circumstances and requirements, and recommend options that will suit you best going forward.

    Limited Company Buy to Let Mortgage Rates

    Inevitably, interest rates on Buy to Let mortgages available to limited companies will vary from one lender to the next, and, although this is still a growing market, the range of products available, and the lenders willing to provide them, is still much narrower than that for personal Buy to Let mortgages. Interest rates will depend on the loan-to-value ratio, the level of equity or deposit you can supply, and the length of any fixed rate period term.

    With demand increasing, and more lenders entering the market for limited company Buy to Let mortgages, rates will be constantly changing to respond to competition. Our expert advisors will be able to take a thorough overview of your Buy to Let business and quickly advise you of the best lenders and products to suit your circumstances.

    Limited Company Buy to Let Mortgage Lenders

    The kinds of lenders who offer Buy to Let mortgages available for limited companies tend to operate in a very niche area of the industry, and it will normally only be possible to work with them via a specialist mortgage broker or other intermediary. The good news is that the number of possible lenders has been growing as more people recognise this way for landlords to structure their business as an acceptable option.

    Mortgage advice for Limited Company Buy to Let

    As a very niche area of the mortgage lending market, advice for obtaining a Buy to Let mortgage as a limited company is a specialist undertaking, and you will need to speak to advisors who have a lot of experience and knowledge in all the products available and sourcing the right mortgage to suit their clients’ circumstances. Even though the number of lenders offering Buy to Let mortgages for limited companies is growing, they will still normally only accept applications via a specialist broker or intermediary.

    Our expert advisors are available for free, no-obligation consultations where we can review your circumstances and let you know what the best options for a limited company Buy to Let mortgage available to you are.

    FAQs

    • What SIC Codes do I need for the Limited Company?
    • Can I use my existing Limited Company?
    • How many properties can I hold within a Limited Company?
    • Do I need to set up my Limited Company before I can apply for an agreement in principle?
    • Can I transfer my property from Sole Ownership to the Limited Company?

    When applying for a limited company Buy to Let mortgage, the lender will typically require that you have registered your limited company with Companies House with the appropriate Standard Industrial Classification (SIC) code that covers its economic activities as a property letting firm. There are actually four SIC codes that relate to property letting:

    • 68100: Buying and selling own real estate
    • 68201: Renting and operating of Housing Association real estate
    • 68209: Other letting and operating of own or leased real estate
    • 68320: Management of real estate on a fee or contract basis

    Lenders may vary in what they require, but generally they would expect your Buy to Let limited company to be registered under 68100 or 68209.

    The majority of Buy to Let mortgage lenders prefer you to work through a Special Purpose Vehicle (SPV) that has been set up for the sole purpose of buying, administering and selling Buy to Let properties rather than a limited company that carries additional complications and external risks potentially associated with business not connected to your property. This will usually mean you have to set up a new limited company as an SPV exclusively dedicated to running your Buy to Let business, with the appropriate SIC code for letting property.

    If you already have a limited company that you are determined to use, then a lender may accept this, as long as no business or revenue streams other than your Buy to Let activity will go through the company from this moment on. There are a very small number of lenders willing to accept a deal with a limited company with other revenue streams, but this will severely limit your options for the mortgage.

    You will be pleased to know there is no limit to the number of properties you can run through your limited company. In fact, running your multiple Buy to Let property business in this way, instead of on a personal basis, can be advantageous for portfolio landlords who are looking for maximum tax efficiency, and can make life easier when applying for further finance for expanding your portfolio.

    There are some lenders who do not need you to have already incorporated your business before getting an Agreement in Principle on a limited company Buy to Let mortgage, but you are likely to be in a stronger position with your application if you have already set up your company.

    It is indeed possible for you to transfer ownership of your Buy to Let property to your limited company, but it does throw up a little complication and some extra costs. To do this, you will effectively need to sell your property as an individual and then buy it with the limited company, which can expose you personally to Capital Gains Tax on the sale, and the limited company to Stamp Duty on the purchase. You should take time to weigh the pros and cons of such an undertaking, and we recommend you seek professional advice before making a final decision.

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