LTD Company Property Finance
SPV’s are limited companies which can be used to purchase your investment property or move your investment properties into, at a time of your choosing – today we examine how a limited company mortgage broker can assist in evaluating the best options for you.
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LTD Company Property Finance
Purchasing a property through a limited company can be wise, whether you are investing in commercial premises or expanding your buy-to-let portfolio.
Let's look at how a company mortgage works and whether it is beneficial to transfer property to a company and consult a limited company mortgage broker rather than applying for a mortgage as a sole trader or other business structure.
Can a Limited Company Take Out a Mortgage as an SPV?
As an alternative to a 'standard' limited company, you may choose to set up your buy to let company as a special purpose vehicle, or SPV.
An SPV is a type of limited company usually set up expressly for buying property through a company.
SPVs exist solely to hold ownership of your property assets, and aside from the associated rental income and mortgage expenditure, do not trade in any other way.
Setting up an SPV with Companies House is similar to setting up a regular limited company.
The cost is £12, and the only difference is that you need to choose the correct classification code, or SIC, to explain what sort of business your new SPV is.
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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.
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.
One of the biggest challenges our limited company mortgage broker clients come to us with is that, with so many lenders to choose from, they find it impossible to know which deals are the most cost-effective and which company mortgage products are best for them.
Most company buy to let mortgages are offered up to an 85% LTV ratio, and different lenders may vary considerably in terms, rates, and LTV ratios.
This standard means that usually, you will need at least a 15% deposit to secure a company mortgage, although, in most scenarios, this is likely to be closer to 25%.
If you would like to invest in buying a property through a limited company and are looking for offers with lower deposit requirements, give our buy to let mortgage broker limited company team a call on 0330 304 3040, and we will walk through all the options with you.
Many landlords choosing to invest through a buy to let company set up an SPV specifically for this purpose.
Usually, the SPV is set up simultaneously as the company mortgage application so that the incorporation information is available.
With a newly registered company, you should bear in mind that the business won't yet have an established trading history, so the application will usually be considered solely on the merits of the individual owner or owners.
You can expect a mortgage lender to undertake credit checks against the individual owners and ask you questions about your personal income to meet the affordability criteria.
There are different advantages and disadvantages to structuring your purchase through a buy to let limited company.
- It can be more tax-efficient than investing as a sole trader.
- Your liability is limited since an incorporated company is a separate legal entity - dependent on personal guarantees or security offered.
- Companies may have multiple shareholders who appear on the title deeds - this can share the ownership and make it simpler to apportion profits.
- Specialist lenders are more likely to be able to extend borrowing to a business than to an individual with several pre-existing properties.
Potential pitfalls buy to let mortgage broker limited company applicants should be aware of include:
- Fewer lenders can offer a mortgage to a buy to let limited company.
- The payable fees tend to be higher for a company buy to let mortgage.
- The application process and checks carried out may take longer than an individual application.
The key to ensuring that you are getting the best mortgage deal is to speak to an independent advisor.
Revolution offers impartial advice as your limited company mortgage broker and can recommend products from across the market sector to best suit your borrowing needs.
You can secure a mortgage for a new business, but it may be slightly trickier since the company will not have any track record or trading history for the lender to rely on.
This obstacle usually means that the lender must carry out the checks against the owners responsible for the business through their buy to let mortgage broker limited company.
However, mainstream lenders may be unable to lend against this type of application.
You may find that the deposit requirements are higher to mitigate the risk posed to the lender in extending a facility to a new company without any credit history to rely on.
Mortgage providers may also require personal guarantees to shore up the credit they are offering before moving ahead with a buy to let mortgage broker limited company.
If you have a new limited company and require a company buy to let mortgage, give our friendly team a call on 0330 304 3040, and we will talk you through the most competitive options.
You will find a range of terms and rates available through a buy to let mortgage broker limited company and different criteria with each lender.
Revolution’s limited company mortgage broker team scours the market to find the best deals and negotiate on your behalf to ensure that your mortgage terms are ideally suited to your investment plans.
You can expect to pay stamp duty on a residential property purchase, whether buying as an individual or through a company mortgage – your buy to let mortgage broker limited company can advise on the exact figures.
There is also a 3% surcharge, which is subject to stamp duty and depends on the value of the property you are buying.
Current stamp duty rates are as below:
- Property value up to £125,000 - 0% stamp duty
- Property value £125,000 > £250,000 - 2% stamp duty
- Property value £250,000 >£925,000 - 5% stamp duty
- Property value £925,000 > £1.5 million - 10% stamp duty
- Property value £1.5 million and above - 12% stamp duty
The tax efficiencies available mean that many landlords may consider transferring property to a company or SPV limited company and consult a limited company buy to let mortgage broker.
Changes to tax regulations have reduced the tax relief available for landlords, although these changes do not affect company properties.
Buy to let limited companies do not have the same issues since the costs of owning a property through a limited company are treated as an expense written off for taxation purposes.
There is a downside we’d advise on as your limited company mortgage broker in that if you already own investment properties and wish to transfer them to a company, you need to conduct a sale and repurchase transaction.
This process can be somewhat complicated with factors to consider including:
- Capital gains tax
- Stamp duty & surcharges
- Legal costs
- Valuation charges
- Mortgage fees
Some landlords may be exempt from some of these factors, for example, if your primary role is as a full-time portfolio landlord.
It is always advisable to speak to a tax advisor and limited company buy to let mortgage broker to ensure that you declare your costs and conduct your property transfer transactions correctly.
We’d clarify as your limited company buy to let mortgage broker that a lot depends on how long your company has been established, how many other owners are involved, and the adverse credit circumstances.
If any of the following apply, give Revolution Brokers a call - we work as a specialist limited company buy to let mortgage broker who can extend mortgage offers to applicants with bad credit or who have had liquidity issues in the past.
- Low credit score
- Adverse credit reports
- Mortgage arrear history
- Past defaults on payment
- CCJs (County Court Judgements)
- DMPs (Debt Management Plans)
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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.