What Is a Limited Company Buy-to-Let Mortgage?
A limited company buy-to-let mortgage is a loan designed specifically for properties owned by a company rather than an individual. Many landlords set up their companies as Special Purpose Vehicles (SPVs) to streamline their property investments. This approach allows for greater control over finances and often provides significant tax advantages.
Key Features of Limited Company Buy-to-Let Mortgages
- Interest Rates:
While interest rates for limited company mortgages can be higher than personal buy-to-let mortgages, the potential for tax relief often offsets the additional cost. Both fixed-rate and variable-rate options are available. - Loan Terms:
Loan terms typically range from 5 to 30 years. The length of the mortgage term depends on factors like the company’s financial stability, projected rental income, and repayment strategy. - Deposit Requirements:
A minimum deposit of 25% is generally required, but some lenders may offer better terms for higher deposits. - Eligibility Criteria:
Lenders evaluate factors such as the company’s credit history, the directors’ financial standing, and the rental income the property is expected to generate. Personal guarantees may be required, especially for newly established SPVs.
Why Choose a Limited Company for Buy-to-Let Investments?
Tax Efficiency
Limited companies can claim mortgage interest payments as business expenses, which reduces corporation tax liability. This is especially advantageous compared to personal buy-to-let investments, where interest relief has been restricted.
Portfolio Growth
For portfolio landlords, managing multiple properties under a company structure can simplify finances and administration.
Succession Planning
Transferring shares in a company is often easier and more tax-efficient than transferring property titles directly.
Enhanced Borrowing Options
Lenders often assess stress rates more favorably for SPVs, which can result in higher borrowing limits.
Limited Company vs. Personal Buy-to-Let Mortgages
Here’s a comparison of the two approaches:
Costs to Consider
When exploring limited company buy-to-let mortgages, it’s essential to account for all associated costs:
- Interest Rates:
Rates typically range from 3% to 6% annually, depending on the lender and loan terms. - Stamp Duty:
Additional property purchases are subject to higher stamp duty rates, so this should be factored into your planning. - Arrangement Fees:
Charged by lenders for setting up the mortgage, usually 1%-10% of the loan amount. - Valuation Fees:
A professional property valuation determines the property’s worth, which affects the loan terms. - Legal and Administrative Costs:
Includes legal fees for setting up the mortgage and ongoing company filing expenses. - Broker Fee:
At the Landlords Broker we charge a fee subject to your circumstances.
Steps to Secure a Limited Company Buy-to-Let Mortgage
- Set Up a Special Purpose Vehicle (SPV):
Register your company with relevant SIC codes such as 68100 or 68209, which indicate property investment activities.
- Work with a Mortgage Broker:
Partner with an experienced broker who specialises in buy-to-let mortgages for limited companies to find the best deals.
- Prepare Your Documents:
Ensure you have rental income projections, company financials, and identification ready for submission.
- Submit the Application:
With your broker’s guidance, complete the application process accurately to avoid delays.
Tips for Success with Limited Company Mortgages
- Research Mortgage Deals:
Compare products from a variety of lenders to find terms that align with your investment strategy.Always understand the true cost of the product not just the rate and fees.
- Understand Stress Rates:
Lenders assess affordability using stress rates to ensure rental income sufficiently covers mortgage payments.
- Seek Tax Advice:
Work with a professional to fully understand the tax implications of owning properties through a limited company.
- Maintain Strong Financial Records:
Transparent and accurate financial documentation can improve your chances of securing favorable terms.
Why Choose The Landlords Broker for
Limited Company Mortgages?
At The Landlords Broker, we specialise in buy-to-let mortgages for limited companies. Here’s what sets us apart:
Tailored Solutions
We provide bespoke mortgage options suited to your investment needs.
Expert Guidance
Our team has extensive experience in navigating the complexities of limited company structures.
Wide Lender Network
Access competitive rates from both high-street banks and specialist lenders.
Transparent Costs
We ensure you understand all expenses, from arrangement fees to ongoing administrative costs.
Start Your Buy-to-Let Journey Today
Whether you’re an experienced landlord or just starting, a limited company buy-to-let mortgage can help you build a profitable portfolio. Contact The Landlords Broker today to explore your options and secure the most competitive mortgage deals available.