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Company Mortgages for Special Purpose Vehicles (SPVs)
A special purpose vehicle (SPV) is a specific type of company set up by buy to let landlords.
As we receive multiple queries about whether an SPV would be beneficial, we have summarised the primary considerations here!
SPVs are most often used to make your property investment business tax-efficient or for landlords who wish to separate their business from their personal finances.
Can a Limited Company Get a Mortgage as an SPV?
An Special Purpose Vehicle is a type of limited company, and so is a separate legal entity from the individual investor. This incorporation option is an excellent way of separating any financial risk in your business from your own circumstances.
Since it is a company, an SPV has its own assets and liabilities.
This separation means landlords benefit, being able to apply for a mortgage as a business rather than as an individual.
The financial separation means that if the business gets into financial difficulties, the impact is restricted to the company and usually does not impact any other side of the business.
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Why Might a Limited Company Mortgage Broker Suggest an SPV Buy to Let Mortgage?
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 buy to let mortgage.
Another way to use an SPV buy to let 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 buy to let mortgage 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 a 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 SPV buy to let 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 SPV buy to let mortgage 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 an SPV buy to let mortgage 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 via an SPV buy to let mortgage 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 buy to let 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 SPV buy to let 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 SPV buy to let 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, before applying for an SPV buy to let mortgage 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 a SPV Limited Company Buy to Let Mortgage
The typical LTV ratios on an SPV buy to let 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 SPV buy to let mortgage 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 an SPV buy to let mortgage.
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 for an SPV buy to let mortgage.
To understand the sort of SPV buy to let 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 SPV buy to let mortgage recommendations based on your circumstances.
SPV Buy to Let Limited Company Mortgage Rates
Company SPV buy to let mortgage products 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 on an SPV buy to let mortgage.
Revolution Finance Brokers are highly experienced in commercial mortgages and SPV buy to let 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 SPV Buy to Let Mortgage Rates for Limited Companies?
SPV buy to let 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 SPV buy to let mortgage options to choose from.
How Can a Broker Help Reduce My SPV Buy to Let Limited Company Mortgage Rates?
A broker can save a lot of time and stress in the SPV buy to let 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 SPV buy to let mortgage deals to match your needs, avoiding unsuccessful applications to unsuitable lenders.
For advice with finding the right SPV buy to let mortgage for your business, contact us today at [email protected].
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As specialist mortgage brokers for a huge variety of applicants, the whole-of-market consultants at Revolution provide access to an exceptional range of lenders, products and mortgage deals. That means you get the advantage of professional negotiation and broker-exclusives through an established lending network to ensure we always find you the most competitive mortgage available.
The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.
We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.