Limited company buy-to-let mortgages

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What is a limited company buy-to-let mortgage?

It’s similar to a standard buy-to-let mortgage, but organised through a limited company, rather than an individual landlord. Taking a buy to let mortgage as a limited company can help you reduce costs and manage your portfolio more effectively, especially if you have multiple properties.

Most people that use this form of purchase for their investment properties are looking to benefit from the tax savings possible from trading as a limited company. This can be particularly important for investors with larger portfolios, and higher rate taxpayers.

Limited company purchases can also make it easier to buy rental property with more than one other person, and can help separate their personal assets from their business assets.

Why use a limited company for buy-to-let property?

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. 

With a limited company buy-to-let, landlords pay corporation tax, rather than income tax on rental income. As income tax is currently charged at a higher rate, particularly for higher earners, who could pay up to 50%, corporation tax is a flat rate of 19%. 

It can also make it easier to manage ownership of properties if there are multiple shareholders involved. Each shareholder can take a salary from the limited company, making it easier to split profits and add more than two people to the title deeds.

Lastly, if you act as an independent landlord, and your investment property is unsuccessful, your own personal assets are at risk. A limited liability company allows you to shelter your personal assets from this type of risk.

Is there a special type of limited company for buy-to-let?

Although there are exceptions, most lenders only consider Special Purpose Vehicle (SPV) companies. An SPV is a company that has been created specifically to manage, buy and sell investment property.

Can I get a limited company buy-to-let mortgage?

They’re certainly harder to come by than a standard residential mortgage, but there are plenty of lender options here. Most tend to be in the more specialist areas of lending, although there are one or two bigger names offering this type of deal, such as Barclays.

As with all mortgages, criteria vary from one to the next, so to find the right limited company buy-to-let mortgage for you, speak to our team, here at Mojo Mortgages. An online mortgage advisor can help you find the solution most suited to your business’ needs.

How does my company qualify? 

Typically speaking, these mortgages are only available to landlords with an SPV, although 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.

  • Many lenders cap the loan-to-value (LTV) at 85% or even as low as 70% LTV with high street lenders. This means at the very minimum you’ll need 15%, but usually at least 25% deposit

  • Rental income - usually this will need to meet 125-145% of the monthly mortgage payment

  • For limited company mortgage applications, landlords may need a separate personal income or savings of at least £25,000 - although the main focus will be the rental income

  • Some lenders will ask for personal guarantees from company directors, particularly if the LTV is above 50%

  • Portfolio size may have either a minimum or maximum number, depending on the lender - some will only consider portfolio landlords (those with 4 or more mortgaged BTLs), whereas others won’t allow them

  • Property and tenant types - There are similar rules to traditional buy-to-let mortgages, so some lenders will prefer standard construction property only, single family rentals and no tenants that receive benefits. However, it’s also possible to find lenders for more niche property types, HMOs and all tenants, we can match you with the right lender for your needs

Can I get a limited company buy-to-let as a newly limited company?

Although setting up a new SPV to get this type of mortgage is common, the lender will see you as more of a risk than an existing SPV that’s been trading for a few years.

As you have no credit or trading history, lenders usually ask the directors for a personal guarantee. This is where they become personally responsible for the mortgage debt should the company not be able to repay it. 

You may also need to provide a larger deposit and/or additional security assets on your loan. 

How do I set up an SPV (Special Purpose Vehicle) for a limited company buy-to-let mortgage?

You'll need to register your SPV under one of the following codes at Companies House:

  • 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

Are there any disadvantages of using a limited company for a buy-to-let mortgage?

Although many landlords will find limited company buy-to-let mortgages more beneficial than standard buy-to-let mortgages, there are some potential disadvantages to be aware of:

  • Only about a quarter of buy-to-let lenders offer limited company options, meaning less choice and competition

  • Higher interest rates are standard

  • If you want to transfer an existing portfolio into a new SPV you may be liable for stamp duty on those properties

Your Mojo buy-to-let expert brokers will be able to advise you on specialist lenders who may be able to help you, no matter what your circumstances and how you currently or intend to manage your SPV.

Limited company buy-to-let FAQs

This depends on the lender you go with. There’s no legal restriction on how many mortgages an SPV can have, but lenders usually limit how many mortgages (or total amount of borrowing) that can be taken out by one entity. 

If you exceed the number of properties allowed, a commercial mortgage may be another option.