Are There Buy-To-Let Mortgages For Limited Companies?

Yes, buy-to-let mortgages for limited companies exist. This is a bit different from personal buy-to-let mortgages, where the property is in your own name. 

With a limited company, the property belongs to the company, and any money it makes is taxed as company profit.

A Special Purpose Vehicle, or SPV, is often used for this. It’s a type of limited company made just for owning and managing properties. Lenders usually prefer this setup because it keeps everything clear and simple.

If you’re thinking about this option, it’s smart to speak with an expert broker who knows the ins and outs to help you make the best choice.

Why Consider a Limited Company for Buy to Let Properties?

Using a limited company to buy to let properties can have major tax benefits.

Individuals may pay up to 45% in income tax on rental earnings, depending on their income bracket. 

In contrast, a limited company pays corporation tax at rates of 19% on profits under £50,000 and 25% on profits over £250,000. 

This can mean big savings, especially for those in higher tax brackets.

Recent tax changes have also made individual ownership less attractive.

The phase-out of mortgage interest relief means individual landlords can no longer deduct all their mortgage expenses from their rental income before tax. 

Instead, they receive a 20% tax credit on their mortgage interest payments, applicable to all tax brackets.

But, limited companies can still deduct mortgage interest as a business expense. This lowers their overall tax liability.

Do You Qualify for a Limited Company Buy-to-Let Mortgage?

To get a buy-to-let mortgage through a limited company, lenders will check these things:

  • Company Structure. Many lenders prefer Special Purpose Vehicles (SPVs) dedicated to property investment. But, some might be open to other company types.
  • Deposit Requirements.  Expect a bigger deposit than a standard buy-to-let mortgage. At least 25% is typical, but some might require 30%, especially for interest-only deals.
  • Rental Income Coverage. Lenders will heavily consider your rental income. It typically needs to be at least 125%-145% of the mortgage payment to ensure the property covers expenses comfortably.
  • Personal Guarantees. If you’re borrowing high LTV mortgages (over 50%), some lenders might ask company directors for personal guarantees. They might also check your personal finances.
  • Portfolio Size. Some lenders might limit the number of properties or their total value in your portfolio. Others might only lend to experienced landlords with several properties already.
  • Your Age. Getting approved might be trickier if you’re close to retirement. But some lenders are flexible for experienced landlords with a small loan compared to the property value (low loan-to-value ratio).
  • Property Type. The property you want to buy can also affect your application. Lenders may have special rules for unusual buildings, houses with multiple occupants or tenants with different agreements (like housing associations).

The Application Process: What to Expect?

If you’re set on using a limited company for buy-to-let properties, teaming up with a mortgage broker is a smart move. They’ll guide you through these steps:

  1. Gathering Necessary Documents. You’ll need to prepare key documents like your company’s financial statements, proof of income, and details about the property you’re interested in. Your broker will tell you exactly what’s required.
  2. Submit Your Application. Once your documents are ready, your broker will help you submit your mortgage application. Lenders will review your company’s financial health and the potential rental income.
  3. Property Valuation. The lender will want a professional valuation of the property to make sure it’s a good investment. This is usually done by a surveyor, and the cost is typically covered by you.
  4. Review The Offer. When you receive a mortgage offer, it’s crucial to go over it carefully. Your broker can help you understand the terms and advise if it’s the best deal for you.
  5. Finalise The Process. The last step involves working with a solicitor to complete the mortgage and purchase the property. They’ll handle the legal side of things, making sure everything is in order for the sale to go through.

Can You Afford?

When it comes to buy-to-let mortgages for limited companies, the Loan to Value (LTV) ratio is crucial. 

This is the percentage of the property’s value that your mortgage will cover. Most lenders offer a maximum LTV of 75%, meaning you’ll need at least a 25% deposit.

Lenders determine how much they’re willing to lend based on the rental income the property is expected to generate. 

They usually look for the rental income to be at least 125% of the mortgage repayments. 

Other factors, like your company’s credit history and the condition of the property, can also influence the decision.

If you want to know your options and what your repayments might be, use a buy-to-let mortgage calculator for a good estimate. It’s an easy way to check if a property investment is affordable for you.

How Do Mortgage Rates for Limited Companies Compare?

Buy-to-let mortgages for limited companies typically have slightly higher interest rates than personal buy-to-let mortgages. 

Lenders see them as a bit riskier.

However, rates can vary depending on how much you borrow, the property itself, and the rent it brings in. 

While limited company rates might not always be the most competitive, the tax advantages of buying through a limited company can often outweigh the higher interest rates.

To get the best deal, shop around and compare offers from different lenders. A bigger deposit and strong rental income can also help you secure better rates. 

Using a mortgage broker familiar with the limited company market can be a big advantage.

Who Offers Buy-To-Let Mortgages To Limited Companies?

You might need to look beyond the usual lenders and talk to specialists. These lenders understand the buy-to-let market for limited companies and can offer you the right deal. Some well-known lenders for buy-to-let mortgages include: 

  • Barclays
  • The Mortgage Works, a part of NatWest Group,
  • Aldermore Bank
  • Paragon Bank
  • Shawbrook Bank 
  • Kent Reliance
  • Vernon Building Society
  • Tipton Building Society

Each of these lenders has its own set of criteria, and what works best for one limited company might not be ideal for another. 

It’s worth discussing your specific needs with a mortgage broker who can guide you to the right lender for your situation.

Are There Any Drawbacks?

There are downsides to consider with buy-to-let mortgages for limited companies:

  • Expect to pay higher interest rates than personal buy-to-let deals as lenders see them as riskier.
  • Running a limited company adds costs like accounting and filing fees.
  • Lenders may demand bigger deposits and stricter checks on your rental income.
  • You might have fewer lenders and mortgage products to choose from.
  • Moving existing properties into a limited company can trigger capital gains tax and stamp duty, making it expensive.
  • Handling a property portfolio through a limited company is legally and financially complex, so you might need professional advice and careful planning.

The Bottom Line

Before you make a move, ask yourself:

  • Can you handle the deposit and other costs of a buy-to-let mortgage?
  • Will the current mortgage interest rates for limited companies eat into your earnings?
  • Does setting up a limited company make it easier or harder to get the mortgage?

To get a clearer picture of your mortgage prospects, consult a professional buy-to-let mortgage broker. They know the ins and outs and can find lenders who are ready to consider you.

They save you the hassle of trawling the internet for deals, preventing the confusion that often follows. 

Brokers offer tailored advice and support you throughout the entire application process.

Need to find a broker? For a free, quick, no-obligation consultation with a buy-to-let mortgage broker, reach out to us.