October 5, 2020
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Applying and getting a buy to let mortgage as a limited company can help you reduce costs or manage your portfolio more effectively, especially if you have multiple properties.
Setting up a limited company to apply for a buy-to-let mortgage has become more popular as rules around mortgage relief have changed over the past few years. For many investors with larger portfolios, and higher rate taxpayers, the savings can be significant. Plus, some lenders such as HSBC can limit lending to larger portfolios.
Landlords also opt for the limited company option if they want to buy rental property with more than one other person, or are looking to separate themselves and their families assets should there be a financial issue in the future.
Although we can find you exceptions, most lenders only consider Special Purpose Vehicle (SPV) companies. An SPV is a company that only deals in property.
You'll want to register your SPV as one of the following at Companies House:
If you already have a SPV buy-to-let limited company, then getting a mortgage this time round should be a bit easier. You'll have a track record, which you can demonstrate in your trading history. If that is a good track record – one where you always make the mortgage repayments and run at a profit, you'll represent much less risk to a lender than someone who is setting up a limited company to apply for a buy to let mortgage for the first time.
That said, you can run into issues if your portfolio gets to a certain scale, no matter how successful your buy-to-letting is. Certain lenders do prevent you taking out more mortgages with them if you have already hit their upper limit.
Your Mojo buy-to-let expert brokers will be able to advise you on specialist lenders who may be able to help you if this is the case.
Applying for a buy-to-let mortgage as an existing limited company usually requires you to show 2 years of accounts.
Also, if the income is less than £25,000 per year, you may need to prove your personal income too.
As you may have guessed, if you are setting up a new company while applying for a buy-to-let mortgage, the lender will see you as more of a risk.
That doesn't make applying for a buy-to-let mortgage as a new limited company impossible, though. It basically just means that you'll have no credit or trading history, so lenders ask that the directors become personally responsible for the mortgage debt should the company not be able to repay it – a process known as a personal guarantee.
As with any mortgage application that is deemed high risk, if you are a new company, you may be asked for a higher deposit or additional security too.
The whole point of these extra checks is to stop lenders looking at your new buy-to-let mortgage application in isolation, so they aim to show red flag risks to lenders, such as empty properties and negative equity.
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Thinking about buy-to-let? you'll find everything you need to know right here - from investment potential to mortgage applications.
It's an option that could end up saving you thousands. Especially if you are looking to grow your portfolio. Can you get a mortgage as a ltd company?