Ask Paul: Why does pricing differ between limited company and personal rates?

Paul Martins, consultant mortgage broker at Mortgages for Business answers one of our most frequently asked questions at the moment.

With many of you looking at transferring your property portfolios from a personal name to a limited company it is no surprise that one of our most frequently asked questions at the moment is why does the pricing differ between the two? Let me explain...

1. Competition

Competition amongst the buy to let lenders offering rates in a personal name is far greater. At present (04/12/2015) there are currently 976 products available to individual applicants and 114 to limited companies. With more products comes more competition, so lenders lower their rates to fight for business.

Only nine of the mainstream buy to let lenders are currently offering limited company rates.

2. Underwriting

Limited company applications are often classed as specialist lending, meaning there is more involved with the underwriting process. This means that rates and arrangement fees tend to be higher.

It really is as simple as that.

I do believe limited company pricing will start to come down in the near future, however due to the complexity of the underwriting process I imagine limited company rates will always be marginally higher than their individual rate counterparts. We have started our own index to track the pricing of limited company buy to let mortgages, so will be able to keep you up-to-date on any developments.

For any further information please feel free to give me a call on 01732 471616

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