Limited Company Buy to Lets
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Limited Company Buy to Let Mortgages
What is a Limited Company Buy To Let Mortgage?
A Limited Company Buy to Let mortgage is arranged on behalf of a limited company.
How does a Limited Company Buy to Let Mortgage work?
A limited company is its separate legal entity and with that, there are many special limited companies you can set up such as Special Purpose Vehicles which are used to hold these properties. You can also have a trading address property which is becoming a frequently used method.
How does this differ from a personal Buy To Let?
For example, if you have a company and they wish to buy some investment properties. Where the investment properties purchased personally would be in your name, the properties purchased via a company would be in the company’s name.
Do limited companies pay stamp duty on buy to let?
Yes, even though it is through a company, the same taxes apply such as stamp duty.
Should I put my buy to let into a limited company?
We are finding the general trend at the moment is that the majority of people are purchasing investment properties within limited companies as you can deduct your mortgage interest as a business running cost.
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Is it better to own property through a company?
There is government legislation called Section 24 which means if you own property through your personal name, then you can be better off to own these through a limited company as you can claim back up to 20% of your mortgage interest rate.
Are Buy-to-Let Mortgages for Limited Companies More Expensive?
Buy to Let Mortgages for companies are more expensive than in your personal name and although the cost has reduced over the years you will be paying a higher interest rate with a limited company.
How Do I Set Up a Limited Company/Get an SPV (Special-Purpose Vehicle) for a Buy-to-Let Mortgage?
To set up a limited company it’s best to speak to a tax adviser. When it comes to the mortgage once your business is set up, then you can explore what options are available via a broker.
What is the lending criteria for a Limited Company Buy To Let Mortgage?
There’s not a big difference between a Limited Company and a personal Buy To Let mortgage when it is against the company director as they have the standard checks such as a credit check.
However, it is trickier when it is against a limited company. It all depends on how the company is listed with its Standard Industry Code as this classes how the company is traded. You need to have this code set up in your Limited Company for the lender to be happy.
You can also have group structures where several limited companies are owned by one holding company. This could be beneficial for a housing developer as you can buy freehold flats within one company and split land registries within your group structure without paying stamp duty. Not every lender will accept a group structure, so it’s always worthwhile stating this when applying for a Buy to Let mortgage.
What documents are needed when applying for a Limited Company Buy To Let Mortgage?
The documents required are fairly straightforward. But in general, you need a certificate of Corporation and a bank account in the limited companies name. Whilst that is all you need, it’s not as easy to set up a limited company in the UK as there is a lot of litigation and hoops to go through.
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What deposit do I need for a Limited Company buy-to-let mortgage and can you borrow more with a Limited Company Buy to Let?
Deposits for a limited company buy to let are very similar to a personal buy to let in that you can have some lenders which will allow you to borrow 75%-80% against the loan to value. You can sometimes borrow more with a limited company due to the lender having a lower stress test. But it’s always worth speaking to a broker to see what lender will allow this.
Advantages and disadvantages of a Limited Company Buy To Let?
As with many Buy to Let mortgages, there are plenty of disadvantages and advantages.
The disadvantage of a Limited Company Buy to Let is that it has to be a separate legal entity, so you will need accounts set up for that company. Furthermore, interest rates will be higher, company accounts to file and if you were to remove any money from the company, you will be paying tax.
However, there are plenty of advantages such as you can claim your mortgage interest costs and if you have a group structure you can move different properties within that structure to save on stamp duty. Lastly, you can also borrow significantly more money with a limited company due to fewer stress rates checks with lenders.
Are there any hidden costs?
There are many fees which some limited companies fail to include. These can range from accountancy fees and legal fees on purchases.
Some lenders will conduct a debenture on the legal entity of the company, so if you move to another lender, you will need a letter of crystallisation which can be another cost plus any independent legal advice associated with that move.
Anything else we need to know?
A limited company can be more flexible, so you can add your siblings, children, private investors etc. If you also have shareholders, they do not need to be on any mortgage applications if they own less than 20% of the company.
There’s a lot of flexibility around a limited company which you can take advantage of, it also limits your liability too, so if something happens within the limited company then your personal assets are ring-fenced.
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