A number of questions were raised following George Osborne’s Summer Budget 2015 as to the proposed changes to buy to let mortgage interest relief on personal borrowing.
The changes to the treatment of mortgage interest has meant that investors are favouring going down the limited company route. As discussed in an article published on This is Money, brokers witnessed a big increase in applications for buy-to-let loans from limited companies as landlords prepared for the new tax amendments in April.
In this article we will be answering whether or not you can get a mortgage through a Ltd company and discussing your options going forward.
Mortgages ARE Available For Limited Companies
The answer is that yes it is possible to obtain a mortgage through a Ltd company.
However, saying this, it is all too common for less-experienced brokers to reject borrowers who are looking to protect their investment properties in Ltd companies. This is because it can be much more difficult to locate lenders who will offer this.
The truth of the matter is that high street lenders generally do not tend to offer mortgages such as these, and prefer to stick to more straightforward conventional businesses.
Consequently, this means that borrowers end up having to opt for the personal borrowing path and means that they aren’t benefiting from the advantages in the way that they should be.
So while there are perhaps fewer lenders offering mortgages for Ltd companies, there is still availably for limited companies choosing to go down this route.
What Are The Advantages?
There are certainly some clear benefits of Ltd company mortgages. One advantage is that from April 2020, mortgage interest will no longer be an allowable expense for individual property investors, yet it will remain allowable for companies holding a property.
Another advantage of limited company mortgages is that you are allowed to have multiple shareholders on title deeds. This means that it is much simpler for you to be able to administer proportions of ownership, as well as a share of profits.
Are They More Expensive?
Generally, buy to let mortgages for limited companies are more expensive. On top of the increased interest rate, the arrangement fees are also charged as a percentage as opposed to a fixed amount.
You also need to be aware of the additional costs in terms of legal assistance should the lender choose for their solicitor to act for them, which is actually quite normal.
Whilst the interest rate and additional costs make buy to let mortgages for limited companies more expensive, the tax benefits often outweigh the extra costs. It is advisable though to check with an accountant first as to whether your personal situation qualifies for this.
Mortgages For Existing Ltd Companies
Whilst it is not always straightforward to get a mortgage if you own a Ltd company and are wanting to possibly refinance or even buy a new property, this isn’t to say that it cannot be achieved.
Although there are a few lenders who will work with companies trading in other areas, it’s generally the case that Ltd company mortgage lenders usually consider companies which are wholly involved in property more favourably.
These companies which only tend to work in rental property are referred to as Special Purpose Vehicle (SPV) limited companies. The benefit of setting up a SPV is that not only will some lenders only lend to SPVs, yet it is also an effective solution to ring-fence the asset.
On the other hand, there are also a few lenders who may also consider normal buy to let lending to Ltd companies that already exist as a trading business. With this option, the business doesn’t essentially have to be trading in property.
Buying Property With A New Ltd Company
Another option which might be preferable to your own situation is that if you are a newly registered limited company, it’s also possible, based upon certain conditions, to be able to obtain a mortgage.
This would have to be the premise that the Ltd company would have to have been formed during your application. It’s also probably be advisable to register it as an SPV.
This article is just a brief look into your options for obtaining a mortgage through a limited company. Should you have any further question or queries, then please free to contact Search Mortgage Solutions – Manchester Mortgage brokers.