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Unlock your property investment potential with a limited company buy-to-let mortgage. Whether you’re starting out or expanding your portfolio, our expertise helps you secure the right financing for your investment goals.
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Discover how limited company but to let mortgages work, the eligibility requirements, and the potential benefits of becoming a Buy to Let investor.

What is a limited company buy to let Mortgage?

A limited company buy-to-let mortgage is a specialized loan designed for property investors who choose to purchase and manage their buy to-let properties under a limited company structure. Unlike traditional buy-to-let mortgages, where the individual is the borrower, the limited company becomes the legal owner of the property and the mortgage is in the company’s name.

What are the typical interest rates for Limited Company buy-to-let mortgages?

The interest rate on buy-to-let mortgages for Limited companies depends on the lender you choose. With the increasing popularity of this borrowing method, more lenders have entered the market, leading to competitive pricing. Some specialist lenders even offer the same rates for individuals, SPVs, and trading limited companies. However, in general, limited company rates tend to be slightly higher than those for individual borrowers.

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How to get a limited company buy to let mortgage?

Getting a limited company buy-to-let mortgage involves similar steps to securing a standard buy-to-let mortgage, but with a few key differences:

The steps involved in apply for a buy to let mortgage includes:

Company Formation:

  • If you don’t have an existing limited company, you’ll need to create one, often a Special Purpose Vehicle (SPV), specifically for your property investment activities. See below FAQ for further guidance.

Financial Preparation:

  • If it’s an existing company, gather your company’s financial documents, including accounts, tax returns. Additionally, prepare personal financial documents for directors and shareholders, as lenders often require personal guarantees.

Mortgage Research:

  • Research lenders specializing in limited company buy-to-let mortgages. Not all lenders offer this product, so it’s crucial to find those that do. Compare interest rates, fees, and terms to find the best deal for your situation.

Engage a Mortgage Broker (Optional):

  • Consider working with a mortgage broker who has expertise in limited company buy-to-let mortgages. They can help you navigate the complexities and find the most suitable lender for your needs.

Mortgage Application:

  • Once you’ve chosen a lender, complete their application form and provide all the required documentation. Be prepared for a more in-depth assessment of both your company’s and your personal finances.

Underwriting and Approval:

  • The lender will assess your application, considering factors like the property value, rental income potential, and your financial stability. If approved, you’ll receive a formal mortgage offer.

Completion:

  • Work with a solicitor or conveyancer to finalize the purchase, ensuring all legal requirements are met.

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What are the advantages of using a limited company structure for buy-to-let mortgage?
Tax Efficiency:

Limited companies are subject to Corporation Tax rather than Income Tax, so the changes in mortgage interest tax relief for individual buy-to-let landlords do not directly affect them. However, when company owners take profits out of the company, Income Tax will apply (either through salary or dividends). For many landlords, using a limited company for buy-to-let mortgages can be more tax-efficient than owning properties personally. Still, it’s crucial to seek advice from a tax professional before making any investment decisions.

Increased Borrowing Potential:

Due to regulatory guidelines requiring stricter stress tests on individual landlords, lenders often offer more generous income cover ratios (ICR) for limited company buy-to-let mortgages. This translates to potentially higher loan-to-value (LTV) ratios, allowing you to borrow more against the property’s value compared to borrowing in your own name. For instance, if two properties generate the same rental income, the one owned by a limited company could qualify for a larger loan amount, assuming all other criteria are met. Here’s a breakdown of the typical stress test rates:

  • Individual landlords: Stress tested at 145% rental income coverage ratio
  • Limited companies: Stress tested at 125% rental income coverage ratio
Flexibility:

Limited companies can have multiple owners, making it easier to share investment and ownership responsibilities.

Do buy-to-let mortgages for limited companies cost more?
The cost of buy-to-let mortgages for limited companies varies depending on the lender. With the increasing popularity of this borrowing method, more lenders, both traditional and specialist, have entered the market, leading to more competitive pricing. Some specialist lenders even offer the same rates for individuals, SPVs, and trading limited companies. However, in general, limited company rates tend to be slightly higher than those for individual borrowers.
How can I find the best limited company buy-to-let mortgage deals?
Finding the best limited company buy-to-let mortgage deal can be a daunting task, but with the right tools and guidance, it becomes much more manageable.
Start with Research and Self-Assessment:
  • Calculate your borrowing capacity: Use our “How much can I borrow?” calculator to estimate how much you could potentially borrow based on rental income from the buy to let property.
  • Access 100+ lenders: As a whole-of-market broker, we have access to a vast network of lenders, including those specializing in limited company buy-to-let mortgages. This ensures you’re not limited to a few options and can find the most competitive deals.
  • Utilize our online comparison tool: Our comparison tool allows you to easily compare different mortgage deals based on your specific requirements, helping you quickly identify the most suitable options.
  • Benefit from our experienced team: Our team has extensive experience in the buy-to-let market, including limited company structures. We can provide expert advice, guide you through the application process, and negotiate with lenders on your behalf to secure the best possible deal.
By combining your research with the tools and expertise available at Mortgage.One, you can confidently navigate the market and secure the most favorable limited company buy-to-let mortgage for your investment goals. Don’t hesitate to contact us for personalized assistance throughout your journey.
Is it possible to obtain a mortgage through a newly formed Special Purpose Vehicle (SPV) that doesn’t have any financial records yet?
Yes, it is possible. In this scenario, the lender will assess the mortgage application based on the financial circumstances of the individuals involved, specifically the directors and/or majority shareholders of the SPV. Most lenders require personal guarantees from these individuals, making them personally liable for the mortgage if the SPV cannot meet its repayment obligations.
What’s the difference between an SPV and a Trading Limited Company for buy-to-let mortgages, and does it matter which one I choose?
A Special Purpose Vehicle (SPV) is a company solely focused on real estate activities like buying, selling, and renting properties. A Trading Limited Company, on the other hand, engages in other business activities as well which are not related to property investment. For lenders, SPVs are typically seen as lower risk and easier to assess, resulting in potentially more mortgage options and slightly lower rates compared to Trading Limited Companies. It’s crucial to consult with your accountant to determine which structure best suits your financial goals and individual circumstances.
In 2015, Chancellor George Osborne announced plans to restrict mortgage interest relief to the basic rate of income tax, gradually phasing it out over four years starting from April 2017. This change significantly impacted landlords borrowing in their own name, particularly those in higher tax brackets, as they could now only claim tax relief at the basic rate of 20%, potentially reducing their profits. If your total income, including rental income, pushes you into a higher tax bracket, you’re also affected by this restriction. For many, this has made borrowing through a Special Purpose Vehicle (SPV) Limited Company a more appealing and tax-efficient option
Does it take longer to get a buy-to-let mortgage through a limited company?
Generally, no. The processing time for mortgage applications from individuals and newly formed Limited Companies is usually similar. This is because background checks for limited companies focus on the director(s), not the company itself. However, if the limited company is an SPV with an existing portfolio or a Trading Limited Company, processing might take longer. This is due to the more extensive background checks lenders perform on these types of companies, including their accounts, properties, and directors.
What are the typical fees and charges associated with a limited company buy-to-let mortgage?
Limited company buy-to-let mortgages involve several fees and charges, both one-time and ongoing. Here’s a breakdown:
One-Time Fees:
  • Arrangement Fees: Charged by the lender for setting up the mortgage, typically a percentage of the loan amount or a fixed fee
  • Valuation Fees: Charged for assessing the property’s value, essential for the lender to determine the loan amount.
  • Legal Fees: Cover the cost of legal services for the mortgage and property purchase.
  • Broker Fees (if applicable): If you use a mortgage broker, they’ll charge a fee for their services. At Mortgage.One, we don’t charge our client broker fee as we are paid by the lender.
Ongoing Fees:
  • Mortgage Interest: The regular payments to the lender, calculated based on the interest rate and loan amount.
  • Company Costs: Setting up and maintaining a limited company incurs ongoing costs like accounting fees, annual company accounts and returns.
  • Property Costs: These include insurance, maintenance, repairs, and any service charges or ground rent.
Other Costs (Potentially):
  • Stamp Duty Land Tax (SDLT): Payable on the purchase price of the property. A 3% surcharge applies to additional residential properties, regardless of whether the purchase is made by an individual or a limited company. Use our buy-to-let stamp duty calculator for accurate calculations.
  • Early Repayment Charges (ERCs): Incurred if you repay the mortgage early, typically during a fixed-rate period.
It’s crucial to factor in all these costs when considering a limited company buy-to-let mortgage. Carefully assess the potential rental income and ensure it covers these expenses, as well as generating a profit for your investment.
Tip: Compare fees and charges from different lenders before making a decision. A mortgage broker can help you understand the costs involved and find the most cost-effective option for your needs.
How does the underwriting process differ for limited company buy-to-let mortgages?
The underwriting process for limited company buy-to-let mortgages differs from individual buy-to-let mortgages in a few key ways:
Company Financials Scrutiny:

Lenders thoroughly assess the limited company’s financial health, including its accounts, cash flow, and business plan (if applicable). This is crucial to gauge the company’s ability to repay the mortgage and manage the property investment.

Personal Guarantees:

Most lenders require personal guarantees from the company’s directors and/or shareholders, making them personally liable if the company defaults. This necessitates a thorough assessment of their personal finances, including income, assets, and liabilities.

Stress Testing:

Lenders apply stress tests to assess whether the rental income can cover mortgage payments even with interest rate fluctuations or vacancy periods. The stress test for limited companies is typically 125% (rental income should cover 125% of the mortgage interest), lower than the 145% applied to individual borrowers.

Experience and Expertise:

Lenders may assess the directors’ experience and expertise in property management, particularly for multi-let properties like HMOs, student lets, or short-term lets like holiday lets and Airbnb, which demand more hands-on involvement.

Portfolio Landlords:

For companies owning four or more buy-to-let properties, lenders evaluate overall portfolio performance, including rental income, vacancy rates, and expenses to assess financial stability and risk.

Legal Structure:

Lenders review the company’s legal structure and documentation for compliance. Some lenders might not consider SPVs owned by a holding company instead of individual shareholders.

Overall, the underwriting process for limited company buy-to-let mortgages is more comprehensive due to the need to assess both the company’s and individuals’ financial standing. This thoroughness helps mitigate the risks associated with lending to a corporate entity.
What is the typical timeline for a limited company buy-to-let mortgage application?
The timeline for a limited company buy-to-let mortgage application can vary significantly, primarily depending on the borrower’s responsiveness and the lender’s workload.
Factors Affecting the Timeline:
  • Complexity of the application: Complex financial situations, multiple properties, or trading limited companies with existing businesses may take longer.
  • Lender’s workload: Each lender has different processing times, and delays can occur during peak periods.
  • Applicant’s responsiveness: Quickly providing all required documentation speeds up the process considerably.
  • Property valuation and legal work: These external factors can also impact the overall timeline.
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General Timeline (Estimate):
  • Initial Inquiry and Agreement in Principle (AIP): A few hours to a few days.
  • Formal Application and Document Submission: 1-2 weeks.
  • Underwriting and Valuation and Document Submission: 2-4 weeks.
  • Mortgage Offer: A few days.
  • Legal Work and Completion: 4-8 weeks.
Overall, the process can take anywhere from 6 to 12 weeks, or potentially longer for complex cases. Simple, straightforward applications with prompt document submission can be much faster. Simple, straightforward applications with prompt document submission can be much faster. Tips for a Faster Timeline:
  • Prepare all documents in advance.
  • Choose a lender known for quick turnaround times.
  • Work with a mortgage broker to streamline the process.

Remember, these are just estimates. Consult a mortgage broker or lender for a more accurate timeline based on your specific situation.

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