Limited Company Buy To Let
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What is a limited company buy to let mortgage?
It’s a mortgage taken out in the name of a limited company, rather than as an individual. Instead of the property being owned by you, it’s owned by your company. You become a company director.
The mortgage is used to buy or refinance rental properties.
Can a limited company get a buy to let mortgage?
It’s possible for a limited company to get a buy to let mortgage.
SIC codes for a limited company buy to let mortgage
Most lenders will only approve a mortgage if the limited company is set up exclusively for the purpose of buying property to rent out. This is called a special purpose vehicle (SPV). It is set up via Companies House in the exact same way as any other limited company, only it needs to have a specific standard industry classification (SIC) code.
Lenders will want to see one of the following SIC codes against your limited company SPV on Companies House:
- 68100 – Buying and selling of own real estate
- 62809 – Other letting and operating of own or leased real estate
- 68320 – Management of real estate
- 68201 – Renting and operating of housing association real estate
Applying for the mortgage
Once the company is showing on Companies House and has a bank account in its name, you can start applying for a limited company buy to let mortgage. The company doesn’t need to have been incorporated for a certain length of time before applying.
All of the directors need to be listed on Companies House too. Lenders may impose restrictions on the number of directors a company is allowed to have. Usually no more than four are permitted. Some lenders will only allow two.
The directors will undergo credit checks as part of the application process, and a director with bad credit will impact which lender the company can apply to. Each director might also have to give a personal guarantee that they will repay the mortgage if the company folds.
There are lenders who can consider lending to trading limited companies but criteria is a lot stricter and options are much more limited.
Why purchase a buy to let through a limited company?
There may be tax advantages to buying through a limited company.
If you own buy to let property in your personal name, you have to declare the income to HMRC and pay tax on any profits. For some people, this income on top of salary or self-employed earnings could push them into a higher tax bracket.
Limited companies are taxed differently to individuals. For example, companies pay corporation tax on profits. People associated with the company, such as directors and shareholders, only pay income tax on money they draw from the company as either salary or dividends. If no money is drawn, no personal tax is paid. Corporation tax would still be mandatory, however some expenses can be offset against this.
Speak to a qualified accountant and tax advisor to find out if a limited company would benefit you.
Why The Mortgage Store Chorley?
Exclusive rates you won’t get directly from lenders
A dedicated point of contact from initial enquiry right through to completion and beyond
Appointments seven days a week, to best suit your schedule
Ongoing rate monitoring until completion as standard
Do you have a question?
Do you pay Stamp Duty if you buy a house through a limited company?
Yes, Stamp Duty is payable.
A limited company will pay an additional 3% Stamp Duty surcharge on any residential property over £40,000. This is true even if it is the first property bought by the company, or by any of the directors.
Can I transfer a property I already own into a limited company?
Yes, it is possible to do this. However, transferring from an individual name to a limited company is seen as a purchase, so the company would be liable for Stamp Duty. You may also have to pay Capital Gains Tax. We recommend speaking to a tax advisor first to find out how doing this would impact you.
How many properties can I own within my limited company?
In theory, as many as you want!
Once you have four or more mortgaged properties, most lenders will class you as a portfolio landlord. That usually involves a bit more paperwork, like providing a property portfolio spreadsheet and a business plan.
Some lenders don’t like the complexities of lending to portfolio landlords, so your options may narrow. Others can still lend up to certain limits, for example up to £1 million lending with their company, or up to ten properties.
Once you’re in a realm of being a portfolio landlord, it’s best to speak to a mortgage advisor.
Can I live in a house owned by my limited company?
If the conditions of the mortgage say you can, then yes. However, most buy to let mortgages need the property to be rented to a paying tenant who isn’t a relative.
You might want to speak to a tax advisor before moving in, though, as there can be significant tax disadvantages to living in a property owned by your limited company.
Are limited company buy to let mortgages more expensive?
Limited company buy to let mortgages do tend to be more expensive than buy to let mortgages for individuals. The rates are usually a bit higher and the mortgage can come with fees such as a product fee, assessment fee, and valuation fee.
Stamp Duty with a 3% surcharge is also payable on purchases.
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How much can I borrow?
How much you can borrow is usually determined by the amount of rent the property might achieve from paying tenants. This figure is set by the lender’s valuer. It is often based on what similar properties in the area are rented for.
Lenders then apply a background stress test to work out how much you can borrow. They want the property to be self-financing. In other words, you shouldn’t be having to put some of your own money in every month to cover the mortgage and associated costs. The rent alone should pay for it and leave you with a bit of profit.
The exact calculation will depend on the individual lender. Some have different calculations depending on factors like whether you want a two or five year fixed rate.
Your personal income and expenditure can still be assessed to make sure you can afford the mortgage payments if the property is empty.
What deposit do I need?
A deposit worth 20-25% of the purchase price is usually the norm. More might be needed if you have adverse credit, for example, or if the lender’s rental valuation isn’t high enough to let you borrow the rest.
What documents are needed?
There are a few extra documents required when applying for a mortgage through a limited company.
We still need proof of ID and proof of address for all the directors, as well as income verification and personal bank statements.
Your company needs to be showing on Companies House and have a bank account in its name. If there are properties held within the company already, a property portfolio spreadsheet is essential.
It’s also worth double-checking that your tenancy agreements and Energy Performance Certificates (EPCs) are in date.
How can The Mortgage Store Chorley help with limited company buy to let mortgages?
Looking to invest in property through your limited company? The Mortgage Store Chorley is here to make it happen!
We love helping businesses like yours secure buy to let mortgages. Our broker understands the unique needs of limited companies and will guide you through the process with ease. We’ll help you find the right mortgage deals tailored to your company’s goals and financial situation.
With our expertise, you can confidently grow your property portfolio and achieve your business objectives. Contact us today to explore your options.
Some types of buy to let mortgages are not regulated by the Financial Conduct Authority.
