Ltd Company Buy to Let Mortgages

How does a Buy to Let Mortgage for a Limited Company Work?

As with a traditional BTL the Lenders will want to make sure the rental income on the property more than covers the mortgage repayment. One of the main benefits of buying via a limited company can be the lenders stress test.

Typically, with a traditional buy to let the lenders stress test will be between 125% and 165% depending on your tax bracket. When purchased via a Ltd company they will normally require the stress test to be 125%. .

For more details on stress tests please see our BTL Guide.

The underwriting will be the same as a traditional BTL and examine the financial situation of any shareholders or directors of the company. They may require them to have a minimum level of personal income to cover any periods without revenue.

It’s important to remember that as with standard mortgages, lenders have different criteria for assessing the affordability of landlords who are directors or shareholders of the company owning the property. Our advisors can advise of the best option for your circumstances.

Down Sides of a Limited Company BTL

As with most commercial mortgages you will find that many of the key buy to let lenders do not lend to Limited companies. This makes this part of the market an area for the mortgage specialist lenders such as Landbay and Fleet.

Whilst there are other high street lenders in this sector the rates available will reflect this limited commutativity. This typically results in higher rates and fees to a traditional mortgage.

When considering if purchasing a buy to let via a limited company is right for you this must be considered. If you are a basic rate tax pay you may benefit from speaking to an account regarding this.

Tax and Buying a Property Through a Limited Company

One of the main benefits of purchasing through a buy-to-let company is that expenses related to operating the rental property can be deducted from earnings, thus reducing the overall tax burden. Some of the deductible costs include insurance, repairs, and, most importantly, mortgage interest.

Limited companies will pay corporation tax on profits, currently 19%, This compared to having to paying income tax on whole rent earnings on a personal BTL. This is especially of benefit if you’re a higher rate taxpayer.

It’s important to remember that here is tax that needs to be paid when you draw down profits from the company as dividends. Please discuss this with a qualified accountant.

A limited company must pay stamp duty, with the tax also due when any properties currently owned are sold or transferred to the company. Furthermore, property held by a limited company is liable for Capital Gains Tax, and there is no tax-free allowance which individuals do benefit from. It is a good idea to see a tax adviser to help work through the options and whether setting up an SPV is the right option for you.

Best Ltd Company Buy to Mortgages

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