Limited Company Buy-To-Let Mortgages
Limited company buy-to-let mortgages are available from many lenders, from high street banks and building societies to specialist, broker-only lenders. As a professional buy-to-let mortgage broker, Fox Davidson can secure terms otherwise unavailable on the high street. Furthermore, we understand the buy-to-let market, tax situation and the best way to finance limited company properties, including student accommodation, HMOs and refurbishment properties.
Limited company buy-to-let terms
The terms for a limited company are slightly higher than a buy-to-let in a personal name, however, with tax changes announced at the end of 2015, the market will become more competitive and more lenders will start to lend in this arena which will add increased competition amongst lenders resulting in more competitive rates and fees.
Mortgage lenders will lend up to 85% loan-to-value. To get the better rates, a loan-to-value of 75% or less is needed. The rates of interest can be fixed or track the bank of England base rate or LIBOR. The lenders arrangement fees are the biggest difference from mainstream buy to let rates as almost all of them are % fees rather than fixed charges although more lenders entering the market are making it more competitive so fixed arrangement fees will become more common as 2016 progresses.
SPVs versus trading companies
You may have heard of the term SPV. An SPV is a short name for a special purpose vehicle which is a limited company set up at companies’ house specifically with the purpose of holding property, perhaps just one property in particular or maybe you intend to hold all of your buy-to-let properties in one limited company.
A trading limited company on the other hand can also hold a buy-to-let but there are considerably less lenders who will lend where the company is not set up as an SPV. For example: BTL Portfolio Ltd can access all lenders as it is an SPV but Fox Davidson Mortgage Brokers Ltd would have a restricted choice as its main line of business is as a financial adviser.
Newly incorporated companies for buy to let are acceptable to mortgage lenders. We can secure finance for an SPV set up the same day as we apply to the mortgage lender. The vehicle itself is not underwritten other than to check it meets criteria in terms of trading purpose, rather the emphasis is on the directors and shareholders of the company.
Whatever route you choose Fox Davidson can secure finance at market leading terms for your situation.
Although a limited company buy-to-let is taken out in the company name which legally has limited liability as it is a separate entity, most if not all mortgage lenders will usually require that the directors/shareholders of the company provide personal guarantees. This is similar to a guarantor mortgage and you are essentially guaranteeing to the lender that if the limited company does not make the payments and repay the loan then you will personally make the loan repayments.
Changing property portfolios from personal to limited company
Following tax changes announced in 2015 this is becoming more popular but how do lenders underwrite your selling of a property in personal names to a limited company name?
First off to note is that lenders will allow you to gift the equity by way of a director’s loan and therefore the limited company does not have to stump up a deposit to buy the property. You may incur stamp duty and capital gains tax personally and so always seek the advice of an account first.
The property portfolio will need to be valued with each property visited by a surveyor who will assess the value and the rental income. If some of the properties are falling short due to insufficient rental income or property value, then lenders can utilise excess rent/value from other properties to achieve the desired loan across the entire portfolio.
Due to exposure limits and to access the best possible terms we may recommend using more than one lender.
Fox Davidson will handle the whole process for you including completion of all paperwork so the process should not laborious.
For more information on limited company buy to let mortgages please do call or email us with your portfolio.