Buy-to-let properties are a popular investment option and investors are constantly looking for ways in which they can streamline the purchasing process and improve profitability.
Cue the “Limited Company Buy to Let Mortgage” which has grown in popularity but continues to have many myths and question marks around its use.
In this article, we cover five frequently asked questions to dispel myths and clear up any question marks around this type of mortgage.
Are limited company BTL mortgages more expensive than standard BTL mortgages?
Limited company buy-to-let mortgages have been on the rise in recent years. With more lenders entering the market and an increase in competition, rates have naturally decreased.
That being said though; rates are higher than high street vanilla products which are exclusively available to individuals.
In order to truly benefit from a Limited Company Buy to Let product you’ll need to consult with your accountant or financial adviser who will be able to assess your tax position and provide you with an informed decision based on your personal circumstances.
What is an SPV limited company?
A Special Purpose Vehicle (SPV) limited company is a non-trading company. It is set up with the sole purpose of buying, selling and letting property.You’ll want to specify a relevant SIC (Standard Industrial Classification) code.
These codes classify a company into a particular industry and are used for tax purposes. The SIC codes used to classify that of a limited company which deals with property are usually 68209 or 68100.
Most Buy to Let lenders prefer lending to SPV companies, because, when compared to standard limited trading companies, they are far less complicated to understand and underwrite.
Will I need to have two years’ worth of accounts to get a limited company buy to let?
In short, no, if you set up an SPV company (non-trading company) lenders will assess the property investment and also consider your personal circumstances rather than that of the company’s.In comparison, a trading limited company is a standard limited company set up to run a business.
This type of company is likely to have a complex trading history,For example, an electrician may operate his business via a trading limited company whilst also using the company to buy, sell or let property.
SPVs are easier to underwrite than applications from trading limited companies, lenders tend to offer more options to SPVs and mortgage products tend to be priced lower.
Can I obtain a Limited Company Buy to Let if I have poor credit?
As previously mentioned, lenders will base your mortgage eligibility on the strength of the borrowers behind the company, as it is the owner/s of the company that will be offering the personal guarantee.Sadly this does mean their credit history will be searched and this could impact their ability to borrow, particularly if they have bad credit.
Can I transfer property I own personally into a limited company?
The simple answer to this question is yes. However, it must be noted that in order to transfer property into a limited company, the property must be legally sold and done so at market value. This also means that transferring property into a limited company gives rise to additional costs, which include but are not limited to:
Stamp Duty Land Tax
Capital Gains Tax
Legal and Mortgage Fees
As always we recommend discussing this with your tax adviser who will be able to guide you accordingly.
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