Limited Company Buy-to-Let Mortgages

A limited company Buy-to-Let mortgage is where you obtain a Buy-to-Let mortgage through a limited company, rather than under your own name.

Changes to Stamp Duty and Buy-to-Let mortgage interest tax relief in 2016 made growing your portfolio more expensive. Therefore, many individuals began to register as limited companies. By doing this it’s possible for landlords to avoid losing out on tax relief.

The criteria is no different to that for a personal application. Therefore, it is indeed possible that you will be able to get the mortgage you need.

The process might be a little more complex and require more legwork, often needing supporting documentation with your application.

You are likely to need to approach a specialist lender who will take a broader view of your circumstances, as traditional lenders tend to avoid those with a bad credit history. They will apply their own individual criteria and consider your current finances, future projections, and more recent credit history.

The nature of the adverse credit event and how long ago it occurred will be important. A few missed store card payments three years ago will carry far less weight than a mortgage default in the last 12 months, for example. If you can meet all the lender’s other criteria and provide a larger than usual deposit, your application should have a good chance.

We don’t recommend a specific lender that provides the best Buy-to-Let mortgage rates for limited companies. This is because each application is assessed on an individual basis, therefore just because a lender is good for you, it doesn’t mean it will be for everyone.

Interest rates for limited company Buy-to-Let mortgages will vary from lender to lender. The rate will depend on the size of the mortgage in relation to the property value and on the term of any fixed rate period. Rates are constantly changing as the market moves and more lenders become involved.

Lenders offering limited company mortgages tend to operate in a very niche marketplace. Therefore, generally, they can only be sourced through a mortgage broker or intermediary.

There are four SIC codes that can potentially relate to property letting:

• 68100 – Buying and selling of own real estate
• 68201 – Renting and operating of Housing Association real estate
• 68209 – Other letting and operating of own or leased real estate
• 68320 – Management of real estate on a fee or contract basis

Lenders can differ in their requirements, but typically Buy-to-Let lenders will expect a limited company to be registered under:

• 68100 – Buying and selling of own real estate or
• 68209 – Other letting and operating of own or leased real estate.

To minimise risk, most lenders prefer a limited company that exists as a special purpose vehicle (SPV). This is because it won’t have any other trade or revenue streams going through it. In the vast majority of cases, this means a newly incorporated limited company is solely dedicated to your Buy-to-Let business and has an appropriate SIC code for property letting.

If you do have an existing limited company with a trading history, some lenders may be willing to accept it, normally on the condition that no other trade or revenue streams, other than the Buy-to-Let business, will go through the company going forward.

A very small number of lenders will accept an existing limited company with other revenue streams in addition to the Buy-to-Let business.

There is no limit to the number of properties you can hold within a limited company. In fact, operating as a limited company can be more advantageous for landlords with a portfolio of several properties. This is due to the potential tax efficiencies it affords when comparing it to a standard Buy-to-Let.

Some lenders do not require a limited company to be incorporated before you apply for an Agreement in Principle. However, you will likely be better placed if this has been done.

You can transfer Buy-to-Let property that you own personally to the limited company. However, this effectively means selling the property as an individual, and purchasing it via the limited company.

This can leave you personally liable for capital gains tax on the sale and the company liable for stamp duty on the purchase.

It is important to weigh the pros and cons of transferring a property before proceeding. We recommend you seek professional advice regarding your tax affairs prior to making any decisions.