Understanding limited company buy to let mortgage products for First time landlords is going to be key in 2017.
This article is aimed at entrepreneurs who are looking to get into the buy to let market with the use of a Limited company buy to let mortgage. Niche Advice arranges limited company buy to let mortgages and is NOT a tax specialist so we recommend that you would need to speak professional help in this regard.
As a first time landlord you have no legacy preventing you from of holding your properties under a limited company, which can have the following advantages:
- Company profits will be taxed at corporation tax rates.
- Drawn income may be from directors’ remuneration (utilising the personal allowance) and dividends which are at a lower rate than income tax.
- Greater amount of property and interest charges may be able to be offset.
- Multiple limited companies can be used to cross-subsidise management expenses.
- Simplifies the addition and removal of share/title holders, and succession planning.
- The buy to let mortgage rental coverage calculations may be lower as recent PRA recommendations are aimed predominantly at protecting ‘individuals’ rather than companies.
Most Buy to Let Mortgage Lenders will usually look for the limited company to be a ‘special purpose vehicle’ (SPV) designed wholly for property with specific SIC code permissions. The setting up of a company is fairly straight forward and your tax specialist should be able to guide you further in this regard. For newly formed SPVs the Buy to Let Lender may request personal guarantees from the directors for their added protection, and underwrite on established earnings outside of the business.
Buy to let limited company mortgage is typically limited to 4 directors with 25% minimum deposit being the norm.
Example Product Rate and Fees – First Time Landlord Limited Company Buy to Let Mortgage
The total amount you must pay back, including the amount borrowed is £495,567.5
Features: Buy under a newly formed SPV limited company. There could be tax advantages but you will need to seek independent advice. Excellent rental calculation is 125% based on the payrate.
| Type and initial benefit period | Fixed for 5 years |
| Minimum deposit / equity: | 25% |
| Valuation fee | £485 |
| Booking fee | £0 |
| Lender arrangement | £4500 |
| Telegraphic transfer / CHAPS fee | £35 |
| Legal fee | £216 |
| Early repayment charge | 4/4/3/3/2% of the amount repaid in the fixed period |
Make an enquiry Online
If you’re looking for a First Time Landlord Limited Company Buy to Let Mortgage products then it is wise to seek professional help from a Buy to Let Specialist Broker such as Niche Advice. Please complete the online enquiry form or call 020 7993 2044.
Any property used as security, which may include your home. may be repossessed if you do not keep up repayments on your mortgage
Important Information
Residential and Buy to Let Mortgages
Rates current as at 16/9/17 . The overall cost for comparison is based on an open market value of £300,000 over a 25 year term. Right-to-Buy examples are based on a discounted purchase price of £200,000. Repayment for Residential and Interest only for Buy-to-let (unless otherwise specified). Eligibility will depend on your own personal circumstances.
KEY – ERC = Main early repayment charge.
The purpose of this web is for information only and is based on a fictitious illustrative scenario. It does not constitute a Mortgage Offer in any way.
It is essential that you seek independent mortgage advice as a suitable product will be based on your own individual circumstances. An interest rate should not be read in isolation, and you should refer to your personal key facts illustration and Mortgage Offers for full terms and conditions. If anything is unclear it should be discussed fully with both your mortgage and legal advisors before entering into a mortgage contract with the lender.
The information contained herein is based on research through the Trigold (IRESS UK) sourcing system. When first published to this site the data is normally 24 hours behind real time, and may or may not still be available.
A first charge over your property is required as security for the loan.
The formal mortgage offer of an advance will be subject to a valuation and other satisfactory references.
Author: Payam Azadi
Payam Azadi is a partner at Niche Advice who are whole of the market Independent Finance Brokers In London. His role is very much focused on Property financing both on residential and commercial lines.
