Why people are looking at buy Buy to Let Limited Company Mortgage products more and more.
The statisticians have been going to town this week reporting on the perceived demise of buy to let mortgages but from our experience the new breed of buy to let limited company mortgages are helping to put the brakes on.
The stats say first time buyer purchases are at an all-time high since the recession whereas buy to let mortgages are in reverse so how are buy to let limited company mortgages bucking the trends and can they continue?
Well the dynamics of the buy to let limited company mortgage are different in mortgage underwriting terms, how so? Well primarily the classification is ‘commercial’ as opposed ‘retail’, so the Lending guidelines are less as company directors are deemed to be more sophisticated, experienced and knowledgeable purchasers. Put another way the Mortgage Lenders are not under the direct scrutiny of the Prudential Regulation Authority (PRA) so can be more flexible with their criteria as they do have to comply with consumer safeguards. As such the Buy to Let Mortgage Lenders drill right to the heart of the borrowing issue that has prevented them from lending, the rental calculation.
On vanilla Buy to Let mortgages most Mortgage Lenders are adhering to the PRA formula of 125% rental cover worked out at a notional interest rate of 5.5%. The shackles are however off for Buy to Let Limited Company Mortgage providers. That’s not to say they are being flippant, and totally ignore the rules others have to play by, but they are generally operating under the line in a sweet spot the vanilla market cannot reach. And, the lower the benchmark the greater the borrowing potential.
Setting up a Buy to Let Limited Company mortgage is far simpler than it sounds. And, once the company is formed there’s no looking back. The taxation position may also be beneficial but you would need to discuss your own arrangements with a tax specialist.
If you want to borrow more on your buy to lets by using the buy to let limited company mortgage contact a mortgage professional, such as Niche Advice.
Niche Advice offers suitable and appropriate advice on mortgages including buy to let limited company mortgages. To find out how we can help you select the Contact tab on this website and complete the online form. Alternatively, call T: 020 7993 2044.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Mortgage Brokers. His role is very much focused on Property financing both on residential and commercial lines.