Limited company mortgages

Limited company mortgage eligibility and criteria

Getting a mortgage on a limited company is not difficult when the company is set up correctly and the rent covers the loan. Lenders want the special purpose vehicle registered at Companies House with property SIC codes, personal guarantees from the directors, and a clear picture of any background portfolio held personally or in other companies. The core eligibility test is the interest cover ratio: the rental income has to cover the mortgage interest by a set margin against the lender's stress rate. First time landlords are considered by some specialist lenders while others want a track record, so eligibility is a question of matching the borrower to the right criteria rather than a single pass or fail. Portfolio landlords with four or more mortgaged properties are assessed across the whole portfolio under the PRA rules, so the business plan, the cash flow, the AST tenancies and the EPC ratings all form part of the picture. We package the company accounts where they exist, the rental evidence and the portfolio schedule so the underwriting runs cleanly. Before you apply, we tell you which lenders are realistic, and we manage the application and the business plan through underwriting so nothing stalls. All criteria are indicative, vary by lender, borrower and property, and are not an offer of finance.

How much can a limited company borrow to buy a property?

A limited company can borrow against the value of the property and the rent it produces, indicatively up to 75 to 80 percent loan to value on buy-to-let, with the exact loan set by the interest cover ratio the rental income supports against the lender's stress rate. Commercial and semi commercial property held in a company is usually geared lower, often around 65 to 75 percent, and priced case by case. There is no fixed salary multiple: borrowing scales with rental income across the portfolio, which is why a company can support far more lending than a single individual on the same properties. A Ltd company will not get a 100 percent mortgage; specialist lenders require real equity in the deal, and a deposit of at least 20 to 25 percent is normal. A Ltd company pays the mortgage from rental income, and where rent is tight, top slicing from director income can bridge the gap. We model the interest cover on our limited company mortgage calculator before approaching lenders. The figures are illustrative, vary by lender and property, and are not an offer of finance.

Limited company mortgage rates and fees

Limited company mortgage rates usually sit a little above equivalent personal buy-to-let lending, reflecting the extra underwriting of the company structure and the personal guarantees, though the gap has narrowed as company lending has become mainstream. As an indication, two and five year fixed rates for company buy-to-let currently range from around 4.5 percent to 6.5 percent depending on LTV, the interest cover ratio and the product fee, while semi commercial and larger portfolio facilities are priced individually. Higher rates buy lower fees and lower rates carry a higher product fee, so the headline rates are only half the picture. Expect a lender product fee, a valuation fee, and legal costs for both the lender and the company, alongside the rate, plus any early repayment charge if you redeem inside the fixed period. Lenders stress test the rent at a notional rate, and a five year fixed is usually stress tested more gently than a two year, which can lift the achievable loan. As a business borrower a limited company can treat the mortgage interest and many of these costs as a business expense, which is part of the financial case for incorporating. We disclose our broker fee in writing and quote the all in cost so cases can be compared properly. The figures are indicative and not an offer of finance.

SPV, trading company or personal ownership

Most property is held in a special purpose vehicle rather than a trading company, because lenders prefer a clean single purpose company with property SIC codes and no unrelated trading risk on its accounts. A trading company that owns its own premises can still raise a mortgage, but the case is underwritten differently and often sits closer to commercial lending. Whether to hold property in a company at all, rather than a personal name, turns on mortgage interest relief, corporation tax against income tax, the size of the portfolio and how profits will be drawn, and since the section 24 changes many higher rate landlords have found a company more efficient. Moving an existing portfolio into a company can trigger stamp duty and capital gains tax, so it is rarely a simple switch, and it is a decision for a landlord and their tax adviser. There are real considerations on both sides: the tax on any transfer, the ongoing company costs, and whether you already hold residential or personally owned property that is better left where it is. We do not give tax advice. We arrange the mortgage once the structure is decided and can work alongside your accountant on a transfer. Where a case would be a regulated mortgage contract or a consumer buy-to-let, we refer it to an authorised firm.