Income Requirements for LTD Company Buy to Let Mortgages

As more investors opt for limited company structures to purchase property, many ask us – “how much income does my limited company need to qualify for a buy to let mortgage?”. Buy to Let Consultant, Charlie Potter, answers everything you need to know about limited company income requirements for buy to let investments.

New Special Purpose Vehicles (SPVs)


A large portion of limited company buy to let mortgage applications we receive are from individuals who have recently set up an SPV limited company. One benefits of founding a SPV is that you can set it up and start investing through it the next day. However, as the company is new, there will be no income to put on a buy to let mortgage application. Thankfully, this is not a problem as when the application is being underwritten, the lender will focus on the Directors and Shareholders of the limited company. Treating your application as though you were investing in your personal name and using your income to meet affordability criteria and underwrite the mortgage.

What is the Criteria?


Some lenders have a minimum income threshold, this is often £25,000. There is an increasing number of mortgage lenders who have no minimum income requirement, they simply need you to have an income which, versus the borrowing, does not leave you overly indebted.

To start investing via your new limited company, you will need a business bank account. These can sometimes take longer to get up and running than the limited company does, although there are some new online options which are quick!

Established Limited Companies


For greater established SPVs, in addition to looking at the Directors and Shareholder finances, lenders will ask for two years of accounts in order to underwrite your buy to let mortgage application, however, the rules on income are the same as with a newly founded limited company.

Will you need a professional accountant to package your accounts for your buy to let mortgage application? Not always! As SPVs do not “trade”, lenders do not necessarily require formal accounts, just accurate ones! Your broker will be able to advise if a lender requires professionally produced financial accounts.

Personal Guarantees


In the majority of cases, the mortgage lender will require that the director(s) of the SPV provide a personal guarantee. A personal guarantee means that, in the unfortunate situation where the lender repossesses a property, and there is still money outstanding, the person offering the personal guarantee will be liable for the remaining balance. It’s important to note that this does not include taking charge of your own home.

Some lenders don’t require personal guarantees, so if this is something you’d like to avoid, do let your broker know, and they will be able to source the correct lenders for you.

Trading Limited Companies


Buy to let mortgage applications via a trading limited company are more complex and therefore require more underwriting. A large portion of lenders will need two years of profitable accounts, showing an income of £25,000 - £80,000+. We do have access to some lenders that don’t have a minimum taxable income threshold.

What if a Company Hasn't Shown Good Profit?


If the company has had a less profitable year, shows an unexplained loss or has declining year-on-year profits, then you may struggle to secure a mortgage when trying to purchase an investment property. Lenders will ask for a credible explanation so they can decide whether to accept the application.

As with any application, the company needs to meet lender stress testing requirements, to prove that should the property be void there are sufficient funds to cover the mortgage repayments.

If you’d like to discuss your limited company property investment plans, do not hesitate to give me a call on 01732 471648 or 07814 072 193

Alternatively, you can email me cpotter@mortgagesforbusiness.co.uk and I will be more than happy to assist.

Should I Seek Expert Advice About Limited Company Mortgages?


We strongly recommend that you take professional tax advice before making any changes to your investment strategy.

This article was updated in November 2021.

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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