If you’re a property investor in the UK, you might have heard that buying rental properties through a limited company can bring tax benefits and other advantages. But can limited companies get buy-to-let mortgages? This blog post explores what buy-to-let mortgages for limited companies involve, how they differ from personal mortgages, and what you should know before taking this step.
What Is a Buy-to-Let Mortgage?
A buy-to-let (BTL) mortgage is a loan specifically designed to buy a property intended for renting out. Unlike residential mortgages, which are based on your personal income and credit, buy-to-let mortgages look closely at the rental income the property can generate.
They often have different:
- Terms
- Interest rates
- Fees
compared to residential mortgages.
Can Limited Companies Get Buy-to-Let Mortgages?
Yes, limited companies can get buy-to-let mortgages.
Many landlords are now choosing to buy properties through a limited company, rather than in their own names. This is often called a “company buy-to-let mortgage” or “corporate buy-to-let mortgage.”
Why Buy Property Through a Limited Company?
Investing through a limited company can have several benefits:
- Tax Efficiency: Limited companies pay corporation tax on profits, which can sometimes be lower than higher personal tax rates.
- Mortgage Interest Relief: Since April 2020, individual landlords cannot deduct all their mortgage interest from rental income for tax purposes. Limited companies, however, still can claim mortgage interest as a business expense.
- Easier Estate Planning: It may be simpler to pass on shares in a company than individual properties.
- Multiple Properties: Managing a portfolio through a company can offer clearer accounts and may simplify reinvestment.
Differences Between Personal and Limited Company Buy-to-Let Mortgages
Understanding the differences between a personal buy-to-let mortgage and a limited company buy-to-let mortgage can help landlords consider which route may suit their circumstances.
| Area | Personal Buy-to-Let Mortgage | Limited Company Buy-to-Let Mortgage |
|---|---|---|
| Deposit Requirements | Most lenders ask for a deposit of at least 25% for a buy-to-let mortgage. | This is typically higher, often starting at 30% or more. |
| Interest Rates | May have lower interest rates compared to corporate buy-to-let mortgages. | Corporate buy-to-let mortgages tend to have higher interest rates compared to personal buy-to-let loans. |
| Arrangement Fees | Fees vary depending on the lender and mortgage product. | Lenders also sometimes charge higher arrangement fees with company mortgages. |
| Lender Criteria | Lenders assess the individual landlord and expected rental income. | Lenders may look at the company’s financial records and accounts, directors, shareholders and rental income projections. |
| Lender Availability | Available from a broad range of buy-to-let lenders. | Not all lenders offer buy-to-let mortgages to limited companies, so options may be more limited. |
1. Deposit Requirements
When buying property personally, most lenders ask for a deposit of at least 25% for a buy-to-let mortgage.
With limited companies, this is typically higher, often starting at 30% or more. The deposit amount reflects the higher risk seen by some lenders when dealing with companies.
2. Interest Rates and Fees
Corporate buy-to-let mortgages tend to have higher interest rates compared to personal buy-to-let loans.
Lenders also sometimes charge higher arrangement fees with company mortgages.
3. Lender Criteria
Lenders assess limited company buy-to-let mortgage applications differently. They may look at:
- The company’s financial records and accounts.
- The creditworthiness of company directors.
- The rental income projections.
Not all lenders offer buy-to-let mortgages to limited companies, so options may be more limited.
Example: John’s Limited Company Buy-to-Let Purchase
John is a UK-based property investor who wants to expand his rental portfolio. He decides to buy his next property through a limited company that he sets up with his wife. The company has no prior trading history.
- John applies for a limited company buy-to-let mortgage.
- The lender requires a 30% deposit on the property valued at £250,000, so John needs £75,000 upfront.
- The mortgage interest rate is 4.5%, slightly higher than the 3.8% he might pay personally.
- John provides a detailed rental income forecast and personal credit details.
- After review, the lender offers a mortgage suitable for the company.
This shows how buying through a company is possible but often requires more preparation.
What You Need to Apply for a Limited Company Buy-to-Let Mortgage
To apply for a corporate buy-to-let mortgage, lenders will typically ask for:
- Company accounts: If the company is new, you may need a personal guarantor.
- Details of directors and shareholders.
- Rental income projections: Often based on independent rental valuations.
- Proof of identity and credit checks: For company directors.
- Deposit funds: Usually 30% or more of the property value.
Potential Downsides of Using a Limited Company for Buy-to-Let Mortgages
While there are advantages, consider:
- Higher upfront costs: Larger deposit and higher mortgage rates.
- Additional accounting and administration: Running a limited company involves extra paperwork and annual accounts.
- Tax changes: Tax rules can change, so benefits aren’t guaranteed long term.
- Dividend Tax: Extracting profits through dividends can involve extra taxation.
Should You Buy Property Personally or Through a Limited Company?
There’s no one-size-fits-all answer.
It depends on your:
- Circumstances
- Portfolio size
- Tax situation
- Future plans
For smaller portfolios, buying personally may be simpler and cheaper. For larger portfolios or investors with higher incomes, using a limited company may offer long-term financial and tax benefits.
Other Mortgage Types for Limited Companies
Limited companies may also access other mortgage types, such as:
- Fixed-rate mortgages: Offer predictable payments over a fixed term.
- Variable-rate mortgages: Interest rates can change, often linked to the Bank of England base rate.
- Remortgages: For when you want to refinance existing company-owned properties.
Final Thoughts: Can Limited Companies Get Buy-to-Let Mortgages?
Yes, limited companies can get buy-to-let mortgages in the UK, and many professional landlords choose this route.
However, corporate buy-to-let mortgages come with different rules around deposits, rates, and lending criteria. It’s important to weigh the benefits against the costs, understand the legal and tax implications, and prepare thoroughly when applying.
If you’re considering investing in rental property through a limited company, expert advice tailored to your situation is important. At BSL Financials, we can help you navigate the mortgage options available and find the right solution for your property goals.
Interested in how limited company buy-to-let mortgages might work for you? Contact BSL Financials today for a no-obligation chat about your options and next steps.
About BSL Financials
BSL Financials specialise in UK residential and buy-to-let mortgages, guiding clients through fixed, variable, and company mortgages with clear, friendly support. Your property investment journey starts here.
