Specialist buy-to-let mortgages:
Limited company BTL
Limited company buy-to-let mortgages have become an important part of the property-investment market. They allow landlords to purchase and finance rental property through a company, providing a clear structure through which to hold assets, receive rental income and build a portfolio.
They can be particularly useful for landlords who want to retain profits for future purchases, invest with other shareholders or separate their property activity from their personal finances. A wide range of lenders now supports limited company ownership, including conventional buy-to-lets, HMOs, MUFBs and other specialist properties.
The company as an ownership vehicle
Legally, the company owns the property and takes out the mortgage. From an underwriting perspective, however, the lender will also look closely at the directors and shareholders behind it.
The company should therefore be seen as the vehicle through which the property is owned rather than a way of separating the mortgage application entirely from the individuals involved.
Lenders commonly assess the directors’ and shareholders’ credit histories, income, assets, liabilities, property experience and source of deposit. This is not necessarily an obstacle: newly incorporated companies with no accounts or trading history can often be accepted because the lender is comfortable assessing the people behind them.
Personal guarantees
Most SPV lenders require personal guarantees from the directors and from shareholders with a significant ownership interest or level of control.
The threshold varies. Some lenders require shareholders owning more than 20% to join the application and provide a guarantee, while others use 25% or require every shareholder to participate. Small minority shareholders may sometimes be excluded from the application, personal assessment and guarantee.
A personal guarantee gives the lender recourse to the guarantor if the company defaults and selling the property does not repay the mortgage. The SPV is the legal borrower and property owner, but it does not necessarily remove personal responsibility for the debt.
SPVs and trading companies
Most lenders prefer a special purpose vehicle (SPV): a limited company established specifically to buy, own and let property. Its activities are normally restricted to recognised property-related Standard Industrial Classification codes.
A new SPV can often be established specifically for the purchase. Existing property companies may also be accepted, subject to their structure, borrowing and Companies House records.
Some lenders consider trading companies that conduct another business, but the choice is narrower because their trading performance, liabilities and exposure to other creditors must also be assessed.
Read more about SPVs here.
Directors, shareholders and deposits
Lender criteria differ over the number of directors and shareholders permitted, minimum shareholdings and who must join the application or provide a guarantee. The ownership structure should therefore be agreed before the mortgage application begins.
The deposit may come from company funds, retained business profits or money introduced by directors or shareholders. Where a director lends money to the company, this will normally be recorded through a director’s loan account. The lender will still require evidence showing where the money originated.
Possible tax advantages
Purchasing buy-to-let property through a limited company may provide tax advantages in some circumstances, particularly where profits will be retained and used to fund further investment.
However, the overall position depends on the company, the shareholders’ circumstances, how profits will be used or withdrawn and the tax rules applying at the time. Company ownership can also create additional accounting and administrative costs.
Tax rules change regularly, so borrowers should obtain advice from a suitably qualified accountant or tax adviser before choosing an ownership structure.
Affordability and mortgage choice
Limited company applications are usually assessed primarily against the property’s rental income. Lenders may apply different Interest Coverage Ratios to company and personal applications, meaning the same property and rent can support different loan amounts depending on how it is owned.
See Rental assessments & affordability calculations for more detail.
Transferring an existing property
Moving an existing personally owned property into a company is normally treated as a sale rather than a simple administrative change. It may involve taxation, valuation, conveyancing and refinancing costs, and the existing personal mortgage cannot usually be moved directly into the company’s name.
Limited company buy-to-let mortgages can provide an excellent foundation for building and managing a property portfolio. The important part is establishing the right company, ownership and mortgage structure at the outset.
Frequently asked questions.
Every client and every mortgage is different, but there are some questions we are asked regularly.
From affordability and deposits to complex income, expat mortgages and specialist property finance, our FAQs explain how different lenders may approach different circumstances.
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