Buy to Let

What is a limited company buy-to-let mortgage?

As the name suggests, a limited company buy-to-let mortgage is a mortgage that’s designed for limited companies that want to invest in residential or commercial properties to rent them out. While they have similarities with personal buy-to-let mortgages, the property is in the company name, rather than yours.

What’s the difference between a LTD company and a homebuyer buy-to-let mortgage?

There are a few key differences between a limited company and a personal buy-to-let mortgage. The most notable ones are:

Owner occupied

The accounts for the business will be scrutinised by the lender to ensure the borrower will not struggle to make the monthly repayments.

How do BTL company mortgages work?

While it’s easy to assume that you don’t need a guarantor for a company buy-to-let, that’s not true. As a shareholder or director, you’ll need to provide a personal guarantee. This is to stop dishonest investors from thinking that they don’t need to repay their mortgage.

This personal guarantee is often from one or more directors. They’ll be required to surrender their personal assets and wealth if your company defaults on the mortgage and there is a shortfall post-sale, so a guarantor must understand this fully before they agree.

Do limited company BTL mortgages require guarantors?

While it’s easy to assume that you don’t need a guarantor for a company buy-to-let, that’s not true. As a shareholder or director, you’ll need to provide a personal guarantee. This is to stop dishonest investors from thinking that they don’t need to repay their mortgage.

This personal guarantee is often from one or more directors. They’ll be required to surrender their personal assets and wealth if your company defaults on the mortgage and there is a shortfall post-sale, so a guarantor must understand this fully before they agree.

How do lenders test affordability?

Lenders will look at your projected rental income to assess how much you can afford to pay back each month. Your rental income will need to be at least 125% of your mortgage repayments, sometimes higher if you are portfolio landlords (4 or more BTL properties).

How much deposit do I need for a limited company BTL mortgage?

Minimum 20% deposit required but higher deposit helps getting lower interest rate.

How do you get a buy-to-let mortgage through a limited company?

Getting a buy-to-let mortgage as a limited company works like getting a standard buy-to-let mortgage. The key difference is that to be able to secure your mortgage, you’ll need to form a limited company (if you haven’t already) and provide financial documentation.

Am I eligible for a LTD company buy-to-let mortgage?

• Deposit: You’ll usually need at least a 25% deposit.
• Rental income: Expected rental income should be at least 125% of the monthly mortgage payments.
• Personal income: Typically a minimum of £25,000, or evidence that you can manage expenses if income is lower.
• Credit history: A good credit record is needed for both the company and its director(s).
• Retirement status: Some lenders prefer directors to be pre-retirement age, though others may allow retired directors.
• Company purpose: The company should generally be set up solely for buying, selling, or managing property.

What are the benefits of limited company buy-to-let mortgages?

It’s tax-efficient: If you’re a higher-rate taxpayer or have multiple properties, you usually save money on tax when you take out a company BTL. Profits are taxed at the corporation tax rate, which is lower than the personal income tax rate.

Better for growing your portfolio: You can reinvest profits within the company without paying personal income tax, helping you expand faster.

Better for legacy planning: It’s easier to transfer ownership of a company than individual properties. Properties owned by a company may avoid certain taxes when passed on.

Better for growing your portfolio

If you have a limited company buy-to-let, you can keep your profits within the company without paying income tax. This money can be reinvested into more properties, helping you expand your portfolio faster

Better for legacy planning

If you want to pass on your business to future generations, it’s much easier to transfer the ownership of a company than a privately owned property. If a company owns the property, it’ll be protected from stamp duty, capital gains tax and inheritance tax.

Are there any disadvantages of a buy-to-let mortgage for a limited company?

Additional costs: Although you’ll be saving money on tax, you’ll need to factor in the additional costs associated with running a limited company. For example, you’ll need to pay for:

• Preparation of accounts and filing these with Companies House
• Corporation tax
• Legal fees
• Annual auditing

Slightly higher mortgage rates

As corporate lending is deemed high-risk, you’ll pay slightly more interest compared to an individual buy-to-let.

If you’re concerned about your mortgage rate, let us help to secure you the best possible deal.

More expensive if you’re a basic-rate taxpayer

If you pay the basic tax rate and only own a few properties, the cost of running a limited company is unlikely to be worthwhile until your salary increases.

How does our limited company BTL mortgage process work?

1. Understanding your needs: The first step is sharing your situation and goals with us. This means we can find the best lenders and deals for you.
2. Gathering documentation: We let you know which documents you need to provide for your LTD company buy-to-let mortgage application. If you need us to, we can help you prepare them, too.
3. Making your application: Once you’ve chosen a property, we’ll leverage our extensive network to secure the best mortgage for you. We handle the entire application process, ensuring it’s as straightforward as possible.
4. Help with lender checks: The lender will perform a valuation, and their underwriter will review your application to ensure it meets their criteria. We supply any additional information required, facilitating a smooth progression through this stage.
5. Receiving your offer: When the lender is satisfied with the checks, they’ll issue a formal company BTL mortgage offer. We’ll support you with the legal details and contract exchanges so you’re not bogged down with paperwork.