Up until recently the majority of buy to let mortgages were taken out in the investors own name. The properties were owned personally and the mortgage mirrored this.

Due to changes in the taxation of mortgage interest many landlords are looking into holding their investment properties within a limited company structure. This has its own advantages and disadvantages but it does also require a different type of mortgage.

To own a rental property through a ltd. company you will need a limited company buy to let mortgage. The entity (the company) that owns the property must also apply for the mortgage.

To do this properly we would recommend taking advice from a limited company buy to let mortgage broker.

The buy to let mortgage

In many respects the mortgage is the same as a normal BTL mortgage; interest rate type, term, repayment method etc.

You will find that the rates charged are slightly higher than for a personal buy to let but you still have fixed rates and tracker to choose from.

The first difference is that it is the company that will be applying for the mortgage. So you will need to put down the registered address, company registration number, directors and owners etc.

It’s a bit difficult to credit check a company, especially if it is new, so the lenders will look at the credit profile of each director. An element of adverse credit can normally be accommodated.

Not all lenders will offer this type of buy to let loan, so having an experienced broker helping you is essential. They will understand the criteria you need to meet for your mortgage and most limited company BTL mortgage lenders won’t accept your application unless you are using a mortgage broker.

While it is the company that applies for the mortgage, the lenders will normally want all directors to provide a personal guarantee to them. In simple terms this means that if your limited company cannot make its mortgage repayments the lender can pursue you personally for them, and ultimately repayment of the whole mortgage.

The property

The vast majority of buy to let properties are standard houses and flats, each housing people under one AST tenancy.

There has been a shift away from straightforward buy to let over to short term rentals and holiday let. These properties can often be more difficult to mortgage due to the location or characteristics.

More experienced investors are spreading their risk via holiday lets and and also multi-unit freehold blocks or MUFB. A simple example of an MUFB is a small purpose built block of flats. Mortgages for an MUFB require an experienced mortgage broker.

What does MUFB mean?

The company

Apart from a few exceptions, most lenders will not accept applications from a trading business.

Their preference is a specific company type called a Special Purpose Vehicle or SPV. The basic structure of an SPV is the same as another Ltd Co and they are very easy to set up. But the company is specifically designed for buying and holding rental properties.

The SPV needs to be registered at Companies House, with the shareholders (owners) and directors all listed.

There are a few different ways of setting up a Ltd Co but at this stage we would recommend speaking with your accountant about whether or not you need to to this. Holding property within an SPV is not suitable for everyone so take some advice before you start spending any money.

The mortgage broker

Pretty much all brokers will be experienced with buy to let mortgages. They have been around for over 20 years and are incredibly popular.

However, buy to let mortgages for a limited company are a little more specialist and not so common. There are not as many lenders available and the broker needs to have the experience to understand the SPV setup before making a mortgage application.

Landlords that own multiple properties may additionally benefit from a portfolio mortgage. This is where there’s one umbrella mortgage facility that finances numerous properties.

We would therefore recommend choosing an experienced limited company buy to let mortgage broker to help you.

They will be able to talk through your situation and provide suggestions and advice concerning the property purchase. While a broker cannot directly help you to set up an SPV than can suggest ways of doing this.

Then it is the advisers job to search the market and find the best buy to let mortgage for your limited company application.

How we can help

Respect Mortgages can introduce you to one of the largest and oldest independent mortgage brokers in the UK. They have specially trained advisers helping clients everyday with their limited company enquiries, for both buy to let and holiday let. Their advice is completely impartial and available wherever you are located.