How to Find the Best Limited Company Buy-to-Let Mortgage

Purchasing property through limited companies has gained significant traction, largely thanks to their potential tax advantages. As a result, recent data shows a sharp rise in the number of limited company buy-to-let mortgages being secured.

In this blog, we’ll guide you through everything you need to know so that you can secure the best buy-to-let mortgage for a limited company, not just in the short term but with long-term success in mind too.

What is a limited company buy-to-let mortgage?

A limited company buy-to-let mortgage is a specialised loan designed for individuals or investors who wish to purchase rental properties through a limited company structure, to generate rental income and make the most of property values increasing over time.

This type of mortgage can offer tax advantages and financial flexibility, as profits are taxed at the corporation tax rate, which may be lower than personal income tax rates. It is particularly appealing to portfolio landlords with multiple properties, as it allows for more efficient management and potential tax savings.

How to navigate limited company buy-to-let comparisons

Navigating the landscape of limited company buy-to-let mortgages requires a strategic approach to ensure you secure the best rates, fees, and terms. The key to success lies in thorough research and comparison of all available options.

• Identify Lenders: Start by identifying lenders who specialise in limited company buy-to-let mortgages. But don't overlook traditional lenders like banks, building societies, credit unions, and online mortgage platforms, as they often provide competitive products and valuable expertise.
  
  
• Compare Mortgage Details: Pay close attention to interest rates, arrangement fees, and any additional costs that may impact your investment's profitability. Consider the overall cost of the mortgage over its term, rather than focusing solely on the initial rate, to make an informed decision aligned with your financial goals. To help you manually compare deals, you can use a limited company buy-to-let mortgage calculator.
  
  
• Build Relationships: Establish a strong relationship with a lender or broker to enhance your buy-to-let mortgage journey. A knowledgeable and experienced broker, such as Finance Nation, can offer invaluable insights and access to exclusive deals. They can guide you through the complexities of the mortgage market, ensuring you find the best product that perfectly matches your investment strategy.

By fostering a partnership with a trusted broker, you position yourself to make the most of your buy-to-let investment opportunities.

What are the best buy-to-let limited company mortgage rates?

Rates for buy-to-let limited company mortgage rates can vary based on several factors, including the lender, the loan-to-value ratio, the financial profile of the borrowing company and of course the fixed length.

Generally, these interest rates range from around 3% to 7% p.a.

While these rates might be slightly higher than those for individual buy-to-let mortgages, they remain competitive due to the increasing popularity of investing through a limited company structure.

It's crucial to evaluate these rates in the context of the overall mortgage package, including fees and terms, to ensure you select the most efficient option for your investment goals. Weighing the potential tax advantages against the potentially higher interest rates is a necessary task, and consulting a tax advisor can be a worthwhile step in this process.

If you want to calculate the potential cost of your loan, use a tool like a buy-to-let Limited company mortgage calculator, helpful when planning your property investments.

How to avoid the common pitfalls when finding the best-limited company buy-to-let mortgages

Securing a buy-to-let mortgage for limited companies can be a rewarding endeavour, but it's essential to navigate the process with care to avoid common pitfalls. By understanding the potential challenges and taking a strategic approach, including the use of special-purpose vehicles, you can optimise your investment and ensure long-term success.

This section highlights key areas to focus on, helping you make informed decisions that support your financial objectives and enhance your property investment journey.

Focusing Solely on Initial Rates

One common pitfall is the tendency to focus exclusively on securing the best initial rates. While an attractive introductory rate can be appealing, it’s essential to consider the long-term implications of the mortgage.

Evaluate the overall cost, including any rate changes after the initial period, to ensure it aligns with your long-term investment strategy.

Overlooking Additional Costs

Many investors overlook additional costs such as arrangement fees, valuation fees, legal expenses, and stamp duty. These can significantly impact the profitability of your investment. It's crucial to factor in all potential costs when comparing mortgage options to avoid unexpected financial burdens.

Some lenders might purposely lower their rates to attract people but then charge higher fees.

Ignoring Loan-to-Value Ratios

Failing to consider the loan-to-value (LTV) ratio can be a costly mistake. A higher LTV ratio might offer more borrowing power, but it often comes with higher interest rates. Balancing your borrowing needs with a manageable LTV ratio can help secure more favourable terms.

Neglecting Long-Term Investment Strategy

Racing for the best short-term deal without considering your long-term investment journey is a common error. Building a strong relationship with a broker who can consistently secure the best rates and fees is crucial for a successful, long-term property investment strategy. A trusted broker will not only speed up the process but also provide invaluable advice, simplifying your investing journey and ensuring it aligns with your broader financial goals.

Why You Should Use a Broker Throughout Your Property Investing Journey

Engaging a broker throughout your real estate investing journey can be a transformative decision, offering numerous benefits that extend beyond securing a mortgage.

Here are several compelling reasons to consider building a long-term relationship with a broker:

Long-Term Relationship and Trust

A broker who understands your investment goals can become a trusted partner in your property journey. By cultivating a long-term relationship, you ensure that your unique needs and preferences are consistently met, allowing for a more personalised and effective approach to managing your investments.

Simplified Management

Managing multiple mortgages can be complex and time-consuming. A broker can streamline this process by consolidating your mortgage management in one place, making it easier to track and optimise your portfolio. This centralised approach saves time and reduces stress, allowing you to focus on growing your investments.

Future-Proofing Your Investments

A knowledgeable broker stays abreast of market trends and regulatory changes, helping you future-proof your investments. By providing timely advice and strategic insights, they ensure that your property portfolio remains resilient and adaptable to evolving market conditions.

Securing the Best Rates and Terms

Brokers have access to a wide range of mortgage products and exclusive deals that may not be available directly to consumers. Their expertise ensures that you consistently secure the best-limited company buy-to-let mortgages, thus maximising the profitability of your investments.

Expert Advice and Friendly Support

Beyond financial transactions, a broker offers expert advice and friendly support throughout your investing journey. Whether you need guidance on market trends or assistance with paperwork, a broker is readily available to provide the help you need, ensuring a smooth and informed decision-making process.

Easy Accessibility

Having a broker who is easy to contact and responsive to your needs is invaluable. This accessibility ensures that you can quickly address any concerns or questions, maintaining momentum in your investment activities and fostering confidence in your property ventures.

By partnering with a broker, you gain a strategic ally who enhances every aspect of your property investing journey, from securing favourable mortgage terms to providing ongoing support and advice. This partnership not only simplifies the process but also empowers you to achieve your long-term investment goals with confidence.

Finance Nation

If you're ready to explore options for limited company buy-to-let mortgages, you've come to the right place.

At Finance Nation, we understand the unique challenges property investors face in securing the best rates and fees. Our mission is to build strong, long-term relationships with our clients, providing expert advice and streamlining the entire process through our innovative Fintech platform.

With access to exclusive mortgage products, we ensure you receive the best deals available, guiding you every step of the way.

Our friendly and accessible team is here to support you, ensuring your investment journey is smooth and successful. Contact us now to book a call and discover your next best step forward in your property investment journey!

Limited Company Buy-to-Let Mortgages FAQ

1. What are some of the tax advantages of using a limited company for buy-to-let properties?

The tax advantages of using a Ltd company for buy-to-let properties primarily stem from the lower corporation tax rates, which may be more favourable compared to personal income tax rates.

Unlike individuals who are subject to income tax on rental income (up to 45% in the UK), limited companies are taxed at the corporation tax rate (currently 19%, though set to rise to 25%).

Additionally, companies can deduct a broader range of expenses, including mortgage interest, which is restricted to individual landlords. When it comes to extracting profits, directors can pay themselves through dividends, which may also offer tax advantages compared to personal income.

However, potential investors should consult a tax advisor to ensure they understand the implications of capital gains tax, dividend tax, and inheritance tax when owning properties through a limited company.

2. How does the process of securing a buy-to-let mortgage differ between a limited company and an individual investor?

Securing a buy-to-let mortgage as a limited company differs from an individual investor in several key ways.

Lenders typically scrutinise the financial health of the company, including its income, assets, and liabilities, as well as the personal financial profiles of its directors or shareholders. This often results in a more complex application process compared to individual mortgages, where lenders focus mainly on the applicant’s credit score and personal income.

Additionally, limited company mortgages often come with higher interest rates and fees because they are seen as a higher risk to lenders. Lenders may also impose stricter loan-to-value (LTV) ratios, which means the company may need to contribute a larger deposit.

3. Are there any specific legal or regulatory requirements for setting up a limited company solely for buy-to-let purposes?

There are specific legal and regulatory requirements for setting up a limited company for buy-to-let purposes, especially if it's a Special Purpose Vehicle (SPV).

An SPV is a company created solely for property investment purposes and is a common structure used by landlords. To set up a limited company, you'll need to register with Companies House, create a company constitution, and appoint directors and shareholders.

The company must also have a registered address and keep records for annual accounts and tax purposes. It's important to ensure the company’s objectives explicitly include property investment activities, as some lenders only provide buy-to-let mortgages to companies structured as SPVs.

Consulting with a legal or financial advisor is crucial to ensure the company is set up correctly and is compliant with the law.

4. Can directors or shareholders of the limited company personally guarantee the mortgage, and what risks are involved?

Yes, directors or shareholders of a limited company may be required to personally guarantee the mortgage, especially if the company is newly formed or doesn’t have significant assets.

A personal guarantee means that if the company defaults on the mortgage, the lender can pursue the personal assets of the guarantor to recover the debt. This presents a financial risk for directors, as they could be held liable for the company's debts even though the property is owned by the company.

It's important to fully understand the terms of a personal guarantee and seek advice before agreeing to one, as it could have serious financial consequences.

5. What happens to the mortgage and property if the limited company is dissolved or sold?

If a limited company is dissolved or sold, the fate of the mortgage and property depends on how the sale or dissolution is handled. If the company is dissolved without transferring the property, the mortgage lender may foreclose on the property to recover the outstanding debt.

However, if the company is sold with the property included, the mortgage may need to be transferred to the new owners, assuming the lender approves the new ownership. This process can be complicated, and lenders may have specific requirements for transferring the mortgage.

It’s advisable to consult legal and financial professionals to ensure a smooth transition during the sale or dissolution of the company.