How Does a Buy to Let Mortgage Limited Company Work?
Purchasing a property through a buy to let mortgage is available through several lenders. However, we always advise seeking professional advice from a limited company mortgage broker before choosing which Ltd company BTL mortgage to take out, as the terms and rates vary significantly.
Revolution is a limited company mortgage broker that works with an established network of lenders specialising in company buy to let mortgages, who have an in-depth understanding of the market and can offer tailored rates to suit your investments.
One of the main benefits of purchasing a buy to let property through a limited company is the potential for tax efficiencies – as your limited company buy to let mortgage broker we can offer further guidance.
Benefits of Using an SPV Limited Company Mortgage
With changes to tax relief for landlords and modifications to the CGT regulations, limited companies have access to tax relief that can make this a more cost-effective way of investing.
Most SPV buy to let companies choose SIC code 68209 - this represents 'other letting and operating of own or leased real estate'.
While you can change your SIC code, later on, it is preferable to make sure this is accurate when you incorporate your buy to let company to avoid any queries.
Applying for a Buy to Let Mortgage Limited Company SPV Product
Many businesses looking for a company let to buy mortgage will choose to incorporate as an SPV to take advantage of the reductions in tax liabilities, comparing offers through a limited company buy to let mortgage broker.
Rather than paying income tax, as you would as a sole trader, you pay corporation tax.
Corporation tax is currently based on a standard 19% rate.
Lenders offering limited company buy to let mortgages also have fewer restrictions around affordability assessments when lending to companies.
That is because they are less risky in terms of coping with changes in interest rates, and therefore the stress testing process is less rigorous.
Most limited company buy to let mortgages are assessed on a minimum rental income of 145% of the mortgage repayments.
SPV Ltd company BTL mortgages will usually need to demonstrate a lower rate of 125% revenue over annual repayments – our limited company buy to let mortgage broker team can assist with more detailed calculations.
Choosing the Right Limited Company Mortgages
When looking to invest in property or transfer property to a company, you must seek expert advice and recommendations from a limited company mortgage broker.
There are many buy to let limited company mortgages on the market, all with different qualification criteria, terms, rates and flexibilities.
Give mortgage brokers a call on 0330 304 3040, and we will help identify the best mortgage products for your requirements and negotiate the terms on your behalf!
Many mainstream lenders or inexperienced limited company mortgage broker teams tend to reject applications from buy to let landlords looking to consolidate their assets in a limited company.
This rejection happens because company buy to let mortgages are a niche product, and a specialist lender is better positioned to understand the circumstances and offer competitive lending.
Revolution acts as a buy to let mortgage broker limited company. We work with buy to let companies, large and small, new and established, matching every client with the ideal lender who offers the most competitive terms for your mortgage plans.
Lender Eligibility Criteria for Limited Company Mortgages
Different lenders have different criteria, but most will consider the following types of company mortgage applications.
However, there are multiple factors when deciding if they can finance a limited company buy to let mortgage:
- Whether the company is a new or established SPV limited business.
- How the anticipated rental income compares to the mortgage repayments - this needs to be at least 125%.
- Whether the applicant is an existing non-SPV limited company.
- If the company or owners have any adverse credit history.
- Whether the company mortgage is through a new Ltd company set up to manage the investment.
- Whether the limited company owners have personal guarantees in place.
- How high the LTV ratio is - usually capped at 85%.
If you are unsure which criteria relate to your company mortgage or which limited company status is more beneficial, give us a call. The Revolution limited company mortgage broker team will be happy to help!
Can a Limited Company Take Out a Mortgage on a BTL to Transfer Ownership?
Usually, it would be best to create an SPV before or at the time of the company mortgage application - it can be difficult to transfer ownership of your property to a buy to let limited company retrospectively.
This transaction is complex because you must purchase the property at a fair market price, which may differ from the original purchase price.
Can a Limited Company Take Out a Mortgage Via a BTL Mortgage Transfer?
Transferring property ownership would also incur stamp duty at the standard rates and may incur a capital gains tax liability.
The only common scenario when buy to let properties can be transferred to an SPV is when a landlord is looking to expand their property portfolio and consolidate existing assets under one company ownership.
Revolution strongly recommends seeking professional advice from a limited company buy to let mortgage broker if you wish to transfer property to a company to ensure that you understand all of the tax implications.
Are Limited Company BTL Mortgages Available to Pre-existing Businesses?
It can be complicated securing a mortgage through an existing limited company - whether you wish to remortgage or invest in a new property. This is why support from a limited company mortgage broker may be important.
Revolution Brokers specialise in acting as a buy to let mortgage broker limited company representative. These exclusive deals are on hand to help you obtain independent advice and expert recommendations to achieve the best outcome for your business.
Many mainstream lenders will only consider applications to mortgage through a buy to let limited company and are unable to offer terms to limited companies carrying on other areas of trade.
In this case, commercial mortgages are usually the most suitable product but speak to Revolution’s buy to let mortgage broker limited company team about your business and your planned investment. We will guide you through the pros and cons of each option.
How Can a Limited Company Take Out a Mortgage as an SPV?
If you have an existing SPV limited company, securing a limited company buy to let mortgage is usually more straightforward with a limited company mortgage broker. While many landlords choose to classify their buy to let company as category 68209, there are other options:
- 68100 - a company that buys and sells real estate.
- 68201 - a company that rents and manages real estate through the Housing Association.
- 68209 - a company that lets and operates either their own or leased real estate.
- 68320 - a company that manages real estate property on a fee-based or a contractual basis.
Applying for a buy to let limited company mortgage through a new SPV can happen immediately.
The responsibility for the mortgage sits with the Director since the buy to let company won't yet have a credit or trading history.
As SPVs become more popular, more lenders offer company mortgage products tailored to this sort of limited entity.
An expanding range of products is making the market more competitive, and as a specialist limited company mortgage broker can help our clients access the best deals available.
Even if one lender has rejected your application, this does not mean that you won't be successful elsewhere, especially if you use an expert limited company mortgage broker to manage your application through a specialist mortgage provider.
How Quickly Can a Limited Company Take Out a Mortgage?
The application process is relatively similar to a residential mortgage application, although each lender will have specific criteria for what they can and cannot lend against.
You can expect to provide information via your buy to let mortgage broker limited company about:
- Your credit history
- Your buy to let company
- Your projected and past revenue
- Your expenses and costs
- Your property portfolio
- Your experience as a buy to let landlord
Given the additional work required to assess a buy to let company mortgage application, the fees tend to be higher than standard mortgages.
However, you can balance these higher costs with the tax efficiencies available by investing in property through a limited company and using a limited company buy to let mortgage broker to reduce your costs.
Additional Costs Charged a Mortgage on Limited Company Applicants
It is always wise to work with a professional limited company buy to let mortgage broker to ensure you fully control the fees and all the costs involved.
Some lenders will require a personal guarantee if you are buying a property through a limited company that is recently incorporated.
A guarantee provides security for the lender, although you should be aware of the ramifications if you cannot keep up with your repayments.
Your solicitor can advise whether this sort of guarantee is suitable for you.
Can a Limited Company Take Out a Mortgage on a Buy to Let With a Small Deposit?
Most lenders will consider lending up to an 85% mortgage cap for Ltd company BTL mortgages. This structure means you will need to have at least a 15% deposit available.
However, the LTV rates change between lenders, and you may need to have a higher value deposit available if, for example:
- You are a new BTL landlord.
- You have a bad credit history.
While creating a property transfer to a company can be complicated, an alternative is to use your existing trading businesses to finance the deposit requirements.
This type of inter-company loan avoids the strain on your personal cash flow of having to fund a high deposit personally.
If you are looking to mortgage through a buy to let limited company and need advice about structuring your mortgage, finding the right lender, or achieving the most competitive rates, give Revolution’s limited company buy to let mortgage broker advisers a call on 0330 304 3040.
We are a specialist buy to let mortgage broker limited company adviser in the commercial mortgage sector and will be able to help and advise on the ideal company mortgage for you.
