Buy-to-Let Mortgage for Limited Companies
A buy-to-let mortgage for limited companies allows you to secure a mortgage on rental properties through a limited company instead of your personal name. These mortgages are specifically designed for purchasing or remortgaging residential properties that are currently rented out or will be ready for rental within one month of completion.
How Do Limited Company Buy-to-Let Mortgages Work?
Limited company buy-to-let mortgages operate similarly to standard buy-to-let mortgages, with one key difference: you’ll typically need a Special Purpose Vehicle (SPV) dedicated solely to managing your residential rental portfolio. While some specialized lenders may accept applications from multi-purpose companies, this is uncommon and usually reserved for well-established businesses.
Managing buy-to-let properties through a limited company can potentially reduce your tax burden, as corporation tax is applied to rental income instead of personal income tax. Since corporation tax rates are often lower than higher or additional rate income tax brackets, this approach can result in significant savings. However, personal circumstances vary, so consulting a tax specialist is strongly recommended.
Another advantage is the separation of business and personal financial liabilities, offering added protection against personal financial risks.
When applying for a limited company buy-to-let mortgage, there can be no more than four directors in the SPV, and all directors are required to provide a personal guarantee for the loan repayments.
How Much Can a Limited Company Borrow for a Buy-to-Let Property?
The amount a limited company can borrow for a buy-to-let mortgage largely depends on the rental income. If you're remortgaging, the rental income being received will be considered, while for a new purchase, the expected rental income plays a key role.
Additionally, the maximum loan-to-value (LTV) ratio currently available for limited companies is 85% of the property value. However, fewer lenders cater to borrowers at this highest LTV level. Most lenders typically offer mortgages with LTVs of 80% or 75%.
If securing a deposit is challenging, but you own other properties, you could explore using available equity from those assets to generate a deposit.
