Limited Company Buy to Let Mortgages

Limited Company Buy to Let Mortgages

Limited company Buy to Let mortgages can be defined as a mortgage taken through a limited company instead of personal names. So, the first thing you need to have is a limited company incorporated for buying and selling of real estate including letting purposes. This is not a huge deal. You can simply get the services of a consultant to incorporate this limited company and the company will be registered within 2-3 days. You can access the company details from the Companies House website.

No access for residential mortgages?

Mortgages done through limited companies are only available for Buy to let properties. You can not get a residential mortgage via a limited company. As a whole, 25% of the But to let mortgages are done through limited companies. This is relatively a significant portion of the whole of the market. The balance, buy to let mortgages are in individual names. However, it is important to get the help of a fin-tech mortgage broker to compare limited company deals available for you.

Tax benefit of limited company buy to let mortgages

There is a significant tax advantage when you buy a property through a limited company. If you are going to purchase a buy to let property in your own name, you have to pay Capital gains tax if you make a profit when you sell the property, Stamp duty land tax (SDLT), Tax on your rental income.

However, if you are buying your first BTL property via a limited company, you will not be taxed as an individual. Still, there is heavy stamp duty payment involved with limited company purchases of buy to let property. The method of valuation of the property would be the same irrespective of which route you select. As the purchase is via a limited company corporation tax is applicable instead. This is overall cheaper compared to the individual route. If you are a portfolio landlord with four or more buy to let properties, limited company BTL mortgages is the answer!

How to find the right limited company buy to let mortgage deal?

There are several lenders who are currently providing limited company BTL mortgage deals. Unfortunately, high street lenders like Santander, Barclays, HSBC are not providing limited company mortgage deals to borrowers. Lenders and building societies like Paragon, Precise, Kensington, The Mortgage Works (TMW) offer limited company deals to their borrowers up to 75% LTV.

Limited company mortgage rates are relatively higher compared to standard buy to let rates. Your monthly mortgage payment will be high and mortgage protection insurance and monthly budget plan will be the answer to manage this. Product fees are also reasonably higher than the personal route. Therefore, it is so important to run an overall cost comparison between the personal route and the limited company route.

Flexibility available with limited company BTL deals

  • A fixed deal for 2.3, or 5 years (higher the deal term, higher the product fee), tracker (term or lifetime), or variable-rate deal. The decision affects how much you can pay monthly based on your rental income. The rental income affordability calculators are factoring the circumstances of the pandemic has had on the mortgage industry.
  • The flexibility with mortgage term. A longer-term means your monthly payments are lower. A shorter mortgage term would help you to settle the mortgage quickly with low-interest costs overall.
  • Capital plus interest OR Interest only– Interest only deals cost less per month. But you’ll need to save up separately to pay off your mortgage, or sell your property when the mortgage ends. This method is suitable when you do not plan to own the property outright towards the end of the mortgage term.

Limited company Buy to let mortgages is the correct path if you are planning to become a portfolio landlord with four or more Buy to Let properties. This plan can help you save tax and grow your portfolio and become the dream landlord you ever wanted to be!

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