Q&As from our Buy to Let Mortgages for Limited Companies webinar.
Can I use my unencumbered property to raise a deposit for a buy to let I’m looking to purchase via my SPV?
Yes. Absolutely. You would need to refinance your unencumbered property to raise a cash deposit. This deposit could then go towards the new property. There are some lenders (commercial) who can put a single mortgage across two properties (cross collateralisation) and thus use the existing property as deposit, but generally speaking, this is a more restrictive and expensive way of doing this.
Do you have to pay capital gains tax when selling a buy to let owned personally to your limited company?
Short answer to this is yes. If your profit exceeds the capital gains allowance, then it is eligible. There are some schemes where this wouldn’t apply, but for more information on this you would need to speak with a qualified accountant.
Can you gift your personally owned investment property to your limited company?
No. Unfortunately, you can’t simply transfer the property across at nil value. You will have to sell it across at a price which is akin to the open market value, almost like it is an unrelated transaction to a third party.
I’m a non-UK national. Can I get a limited company mortgage?
If you are an expat, then yes – there are lots of limited company mortgage options out there. If you are non-UK national living overseas, then it will be slightly more difficult. The kind of institutions willing to do these deals are the international banks – generally, banks that have a presence in your country of residence and here in the UK.
The options available to you will really depend on where in the world you are based.
You mentioned three acceptable SIC codes during the presentation. Do you just have to have one of these associated with your SPV Ltd company or all three?
One, two or all three. It’s up to you. As long as you have one of the SIC codes mentioned (68100, 68201, 68209) a buy to let lender will consider your application.
How do rates and fees for limited companies compare with rates and fees for individuals?
It all depends on the lender. Most of the lenders which offer rates to limited companies and landlords borrowing personally offer the same pricing to both.
If you are non-portfolio landlord looking to borrow personally on a vanilla buy to let property you will be able to achieve lower rates, however if you are a portfolio landlord or looking to purchase a complex property type in your personal name, rates will be more comparable with that of a Ltd Co. I would also add that as the number of lenders willing to lend to a Ltd Company increases, as it has done over the last two years, increased competition drives down pricing which has certainly helped to reduce the gap.
As an SPV would I be eligible to get a business loan to buy more properties? For example, take a loan out for £50k to use as a deposit?
Buy to let lenders don’t tend to lend to applicants who have taken out a loan to fund the deposit. Saving the money up or refinancing your current buy to let property or home to raise the money are better routes to go down.
The reason lenders don’t like this is because you will be servicing both the loan and the buy to let mortgage, which needs to be taken into account when assessing affordability.
Where do you see Ltd Co rates going in the near and medium term?
Taking away a possible interest rate rise in the next 12 months, I think there is room for limited company buy to let lenders to become more competitive with their pricing; as lenders fight for business in a very busy market.
The clearing banks (the ones with the very cheap rates) aren’t interested in the limited company space at the moment, so I can’t see limited company rates matching the high street deals – particularly in the near and medium term.
Should I keep my property portfolio with a single lender or does it not matter?
Realistically whilst you’re building your portfolio there is no real merit in sticking with one lender. You are better off seeking out the most appropriate rates and deals available at the time.
All lenders have exposure limits, for example some will only give one borrower ten mortgages, others they may cap loans at £1m. As you build a portfolio you will hit a ceiling with each lender, having said this there’s lots of lenders to go round, so you can keep going for a really long time.
What we do tend to find is that when landlords get very large portfolios, they start to refinance multiple properties onto one loan facility. This is mainly from a logistical perspective, as they see one loan as easier to manage. If you are looking to do this be aware that rates tend to be more expensive and LTVs more restrictive.
Do lenders always require a personal guarantee from the director when lending to an SPV?
There is one buy to let lender that doesn’t require a personal guarantee from the director, but that is it. One out of everyone else.
Can you have more than one lender lending to a Ltd Co?
I own a commercial property and a residential property outright. Which one would I be better refinancing to release cash to buy another property?
Purely from an interest rate perspective the residential property would be a cheaper option. But, it may be because of the values, rents and where you need to get to that the commercial property may be more beneficial. I would imagine that the residential property is the one to go for, but without knowing more details I couldn’t say for definite.
Is it possible to finance a residential property via a Ltd Co?
If you are referring to your home, then the answer to that is no. If the company directors are living in the property it crosses the line into regulated lending.
Is it better to have two separate companies? One holding company paying the mortgage and the other collecting the rent?
I don’t see any merits in having a separate company holding and collecting rent. There may be a good accounting or tax reason to have this, but it isn’t something I’m familiar with. In my personal situation having one company works well.
I occasionally carry out refurbishments and sell some property on. Will this make it harder to get a Ltd Co buy to let mortgage?
Realistically if you are running a buy to let through a limited company it is quite natural to do the occasional refurbishment. Lenders are quite comfortable with the odd sale/transaction of this nature in the company accounts. If however, they look at your accounts and you’re blatantly a full-time developer with a bit of rental income coming in on the side, you may find they class you as a trading limited company.
Do lenders accept limited companies placed in a trust?
Trust lending can be done, but this will be classed as a commercial proposition. Generally, you will be looking at low LTVs – sub 50%. This is because the lender needs to be comfortable with the absence of a PG if one is not available, which is very standard with Trust lending.
Can my SPV Ltd co purchase 75% of my residential property, so it becomes a buy to let? With myself owning the other 25%
No. In this situation the company would need to own 100% of the property but you would be putting your equity as a deposit into the company. Your 25% equity would go into the company as a director’s loan. You can’t split this out. Its worth adding here, when lending to a Ltd Co, this can be the only borrower.
How quickly can you complete when borrowing via a Ltd Co?
When you apply for a Ltd Co buy to let mortgage, offers are generally produced within 2-3 weeks. After this, it really depends on how quickly your solicitor can process the application. I would say on a really good run you are looking at 3 weeks, but as an average nearer 4-6.
Is Ltd Co lending considered as commercial lending?
We don’t see it as commercial lending here, as it isn’t technically classed as a commercial loan. Saying this, there are both buy to let and commercial lenders playing in this space alongside one another.