Limited Company Buy-to-Let

Tax benefits?

Buying a rental property through a limited company is an increasingly popular option for landlords. If you’re looking to explore this route, you’ll need a specialist buy-to-let mortgage suited to limited companies. With the help of a qualified mortgage broker, securing these types of loans – and finding the best lenders – becomes much simpler.

Here’s a comprehensive guide to help you understand limited company buy-to-let mortgages and how Mortgage One can provide the expert support you need to get the best deal.

Can You Get a Buy-to-Let Mortgage Through a Limited Company?

Yes, you can! Buy-to-let mortgages through limited companies are growing in popularity due to recent tax changes affecting private landlords. These mortgages are generally available through specialist lenders, and expert advice from a broker like Mortgage One can make all the difference in securing the best terms.

What Are the Benefits of Buying Through a Limited Company?

One of the main benefits is the potential for tax savings. Under recent government changes, landlords holding properties in their own names now face stricter tax regulations, making it harder to build a profitable portfolio. In contrast, those operating under a limited company pay corporation tax on rental profits instead of income tax, which can lead to a lower overall tax bill.

For high earners, corporation tax (currently 19%) is generally much lower than the personal income tax rate of up to 45%. Furthermore, using a limited company can make it easier to manage ownership if there are multiple shareholders, while also limiting personal liability should the business encounter financial difficulties.

How a Buy-to-Let Broker Can Help

Navigating the world of limited company buy-to-let mortgages can be complex, especially if you’re new to the process. That’s where a broker, like Mortgage One, becomes essential.

A broker will guide you through the application process, ensuring that your paperwork is in order and reducing the risk of rejection. They will also have access to specialist lenders not typically found on the high street, helping you secure better interest rates and terms tailored to your needs.

Rules and Eligibility Criteria

When applying for a limited company buy-to-let mortgage, the following criteria are important to keep in mind:

• Special Purpose Vehicle (SPV): Most lenders require that your company is set up as an SPV, specifically designed for buying, selling, or letting property.

• Deposit Requirements: Limited company mortgages usually require higher deposits, with many lenders capping the loan-to-value (LTV) ratio at 85%, and some as low as 70%.

• Personal Guarantees: Lenders often ask for personal guarantees from directors, especially if the LTV is above 50%.

• Rental Income: The rental income typically needs to cover at least 125% of the mortgage payment.

• Personal Income: While rental income is crucial, some lenders will also consider personal income or savings.

• Portfolio Size: Some lenders have restrictions on how many properties you can hold, while others cater specifically to portfolio landlords.

• Age and Property Type: Age limits and property types may also affect your application, with some lenders having stricter rules than others.

What Interest Rate to Expect

Interest rates for limited company buy-to-let mortgages tend to fluctuate, but they typically range from around 2.8% for a variable-rate deal to 6.29% for a long-term fixed-rate mortgage. These rates are often higher than standard buy-to-let rates, but with a good broker, you may be able to secure a more competitive deal.

Which Lenders Will Consider Your Application?

Specialist lenders dominate the limited company buy-to-let mortgage space. High-street banks are less likely to offer these products, but certain building societies and smaller banks (such as Kent Reliance, Shawbrook Bank, and Paragon) do provide options. With market conditions always changing, a broker can help you identify which lender is the best fit for your circumstances.

Get Expert Advice From Mortgage One

Finding the right mortgage for your limited company doesn’t have to be complicated. At Mortgage One, we specialise in buy-to-let mortgages for limited companies and can help you secure the best deal. Contact Mortgage One today for expert advice and take the next step toward building your property portfolio.