What is a limited company buy to let mortgage?
A limited company buy to let (BTL) mortgage is designed for landlords who buy a rental property through a limited company.
These have become more popular in recent years, as the tax laws surrounding these properties have changed.
You may be an experienced landlord looking to grow your portfolio through a limited company. On the other hand, you may be a first time landlord trying to find out if you could save money by using a Ltd company.
Our experts have a variety of limited company BTL mortgages on offer. They may be able to find a solution to help you purchase a new property or remortgage a current one you own, allowing you to get started with your plans.
Benefits of getting a buy to let mortgage as a LTD company
There are many benefits to getting a Ltd company buy to let mortgage over purchasing as a private landlord. Some of these include:
- Potential tax benefits. Private landlords will be required to pay income tax. This is a culmination of their total income. Adding rental income to their overall income could push them into a higher tax bracket, meaning they have to pay more.
Whereas, when registered through a Ltd company, rental income would be subject to corporation tax. There are no upper brackets of corporation tax, meaning that you could potentially save money.
- Reduced liability. Since a Ltd company is a separate legal entity, your personal assets are protected from any financial liabilities incurred by the company. This can help mitigate personal risk, and offers more peace of mind.
- Easier to manage a larger portfolio of properties. If you are trying to build your property portfolio, you may find it is easier to manage your properties through a Ltd company. When you own a Ltd Company, you may have the help of an accountant or assistant who might be able to handle the administrative tasks associated with owning and renting out multiple properties.
Disadvantages of getting a BTL as a Ltd company
There are a few drawbacks to getting a buy to let as a Ltd company rather than as a private landlord.
- Higher costs. There are legal and administrative costs, plus the ongoing costs of filing accounts and tax returns. These could prove more costly than if you purchased the property as an individual. There may also be higher interest rates as some lenders may view limited companies as higher risk, because of their complex ownership and legal structures.
- Limited borrowing options. Lenders could potentially ask for a larger deposit or they may charge higher fees. This is to offset any perceived risks of lending to a Ltd company. There are also fewer BTL lenders that offer mortgages to limited companies, which may make it more difficult to get the funding you need.
- Additional administrative responsibility. When managing property through a limited company, you have to factor in the additional responsibilities of running a company. This could include appointing a director or accountant to manage finances, and ensuring you are compliant with legal requirements.
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What is an SPV?
A special purpose vehicle (SPV) is a limited company that is set up for a particular purpose. It is commonly used for property investment. Landlords often use it to hold properties that they would normally rent out.
One of the main reasons you might choose to use an SPV is the extra layer of protection it can give. If the property is held in an SPV, the liability of the owners is limited to the value of the property, rather than their entire personal assets. This can be less stressful for people who are trying to protect their personal assets.
Another reason these may be used is for tax planning purposes. Investors may be able to offset the interest on their mortgage against their rental income. This may help reduce their tax bills and save money.
Using an SPV could possibly help you get better mortgage rates than those available to private landlords. This is because lenders may view the risk differently.
There are definite benefits of using an SPV. However, there may be extra costs and administrative tasks. It may be beneficial to seek professional advice before making any decisions.
Our experts can help with both SPV mortgages and limited trading company mortgages, so we may have a solution that meets your plans.
How do you set up a limited company?
If you think you’d benefit from setting up a limited company, the process is quite simple. You can register with Companies House, either online or by post. The cost of this starts from as low as £12.
You can register a limited company by yourself, but you may benefit from the help of a professional advisor.
Eligibility criteria for Ltd company BTL mortgages
The criteria for a LTD buy to let mortgage will vary. Each lender will have different standards to qualify for a loan.
Some common requirements a lender will consider include:
- Your credit history.
- The rental income potential.
- Your age; many lenders will require you to be at least 21 years old to apply for a BTL through your limited company.
- Proof of income. Lenders will usually require you to provide financial statements, tax returns or bank statements to provide evidence of the company’s income.
- The LTD must be registered with Companies House.
How do I apply for a buy to let mortgage as a Ltd company or SPV?
You can apply for a buy to let mortgage once you have set up your limited company or SPV. You can go directly to a bank or lender for this, but bear in mind that not all lenders will offer these products.
If you are struggling to find out where you can get a loan, it might be worth approaching a broker. However, this may mean there are extra fees involved.
We're a specialist broker who can support customers in this situation. You can get a quote from us in three easy steps;
- Work out how much you would like to borrow and how long you would like to stretch the repayments out by.
- Call us, or enquire via our online form for free. One of our team will search our database and get back to you if they can find a suitable solution.
- Once you are happy with the solution we offer you, we can arrange it. We will keep you updated with the progress of the loan so that you can get the funds as quickly as possible.
