Why Might a Limited Company Mortgage Broker Suggest an SPV?
One of the main attractions to investing in property through an SPV is tax efficiency. The value of this is higher for higher rate taxpayers or investors with an extensive property portfolio.
A deposit paid against a property by the investor can be treated as a loan to the company.
This cost is then offset against the profits achieved through rent, and the debt to the owner is repaid.
Offsetting the costs in this way shows a lower profit and thus incurs a smaller corporation tax liability.
Company tax is different from personal tax, so mortgage lenders are typically able to offer a higher mortgage value and be more flexible in calculating projected rental income for properties purchased through an SPV.
Another way to use an SPV is to take out a mortgage through a group.
The ownership is easier to divide through share ownership, assigning proportional responsibility for keeping up with the mortgage repayments.
The importance of separating financial risk cannot be overstated; your personal property, such as your family home, does not form part of the security and therefore are kept separate from the business assets.
If you are considering using an SPV to invest in property or deciding whether you will save costs in transferring your portfolio to a company, give us a call, and we will be happy to walk you through the pros and cons!
Eligibility Rules for an SPV Limited Company Buy to Let Mortgage
As with any other mortgage, each lender has a set of lending criteria that have to be met for them to be able to extend an offer.
If one lender has turned you down, they may well be not the best suited to your borrowing requirements, and a more specialist lender will be happy to consider your application!
The application process will include enquiries about:
- Your property portfolio and the company structure
- How many directors are in place - often limited to four
- The company ownership structure
- Your credit score and history
- The type of property you wish to purchase and where it is located
- What the LTV value is on the mortgage lending you are applying for
Why Use a Limited Company Mortgage Broker as an SPV?
If you are a first-time investor, you will likely find fewer lenders on the market able to offer to lend since many have a minimum number of years experience as one of their criteria.
Experience demonstrates that you will be able to ensure you have tenants for your property, know how to maintain it and have a track record of making good on mortgage repayments.
However, specialist lenders can lend to new SPVs and new investors.
You are likely to find the deposit requirements are a little higher and the interest rates less competitive. If you are looking for an SPV BTL mortgage as a new investor, give us a call!
Can a Limited Company Get a Mortgage as an SPV on Any Property Type?
The type of property you want to invest in will impact the availability of mortgage lending, and higher risk properties are more difficult to mortgage.
They are usually considered riskier to the lender because they expect them to be more challenging to resell should the property ever be repossessed.
Higher risk properties include:
- Blocks of flats or tower blocks
- Residences above a commercial premise
- Prefab concrete properties
- Wood or timber-framed properties
- Homes with thatched roofs
- Corrugated iron structures
If you are looking to invest in a 'non-standard' property, that doesn't mean that you won't be able to secure a competitive mortgage.
We advise that you work with an expert broker who can indicate the lenders who they know will be able to consider your mortgage application.
Will Incorporating an SPV Help Me Get the Best Buy to Let Mortgage Rates for Limited Companies?
Setting up an SPV is as simple as creating any other kind of limited company. That means registering with Companies House and letting them know that the business is a buy-to-let company in the UK.
You can either incorporate the business yourself on Company House or commission a professional to set this up for you.
If you need any recommendations for help with this process, give us a call!
While setting up your new SPV, you will be asked to indicate what type of company you are creating. This classification is called a SIC code, and the correct code will match the kind of business, such as real estate.
Deposit Requirements for an SPV Limited Company Buy to Let Mortgage
The typical LTV ratios on an SPV mortgage go up to around 85% of the property value.
However, this isn't fixed, and many lenders can be flexible when considering what sort of lending they can offer and what level of deposit is acceptable.
Your circumstances have a significant impact here - if you are a new property investor, already have a reasonably extensive portfolio, or have a poor credit history, you will need a higher deposit.
For example, if you purchase an investment property costing £200,000 using a mortgage provider with an 85% LTV ratio, you will need a 15% deposit available, i.e. £30,000.
To understand the sort of mortgage offer you can expect to secure and what level of deposit you will need to have to be able to proceed with your investment, give Revolution Brokers a call.
We will provide personalised recommendations based on your circumstances.
Buy to Let Limited Company Mortgage Rates
Company mortgages tend to carry higher interest rates than residential mortgages.
However, using a specialist lender who is comfortable lending to SPVs and companies is the best way to achieve the most competitive rates.
Revolution Finance Brokers are highly experienced in commercial mortgages and SPV lending. We can match you with our network of lenders to ensure you achieve the best deals on the market.
Where Can I Find the Best Buy to Let Mortgage Rates for Limited Companies?
SPV mortgages are a specialist product, which means a mainstream lender is unlikely to be able to offer a mortgage to this type of company.
The tax savings available have driven a considerable amount of growth in the SPV mortgage market, so there are many lenders and options to choose from.
How Can a Broker Help Reduce My Buy to Let Limited Company Mortgage Rates?
A broker can save a lot of time and stress in the mortgage application process and act as your advocate to negotiate rates and terms on your behalf that are not available in the open market.
By considering your circumstances and ideal borrowing scenario, we scour the UK mortgage market to find the best lenders and the most competitive deals to match your needs, avoiding unsuccessful applications to unsuitable lenders.
For advice with finding the right SPV mortgage for your buy-to-let business, contact us today at info@revolutionbrokers.co.uk.