Why Purchase a Buy-to-Let Property as a Limited Company?
Taking out a mortgage and purchasing a buy-to-let property through a limited/LTD company or SPV (Special Purpose Vehicle) can be more tax-efficient than doing so in your personal name as a private landlord.
You Pay Income Tax on Rental Income from a Privately-Owned Rental Property
- To calculate how much Income Tax you must pay, your rental income is added to your overall personal income which may push you into a new tax bracket and result in you paying Income Tax at a higher rate
You Pay Corporation Tax on the Rental Profits on Properties Held in a Limited Company, not Income Tax
- Unlike Income Tax, there are no upper tiers for Corporation Tax - Corporation Tax is set at a static rate of 19% (2021 – 2022), which means that’s the maximum rate you’ll be charged unless the Government change the rate of Corporation Tax itself
- You can offset many expenses against the income for a company that you can’t with a privately-owned rental property
You can find more information on the other advantages of purchasing a buy-to-let through a limited company in our guide.
Or, keep reading to compare buy-to-let mortgage rates for limited companies and find out how John Charcol can help you.
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Limited Company Buy-to-Let Mortgage Rates
Use our free best buy tool to compare the best buy-to-let mortgages for limited companies.
How to Get a Mortgage Through a Limited Company
|Speak to a Mortgage Broker||You’ll need a specialist mortgage broker like John Charcol to apply for a buy-to-let mortgage through a limited company. Not only do we understand what criteria you need to meet for your mortgage, but most limited company buy-to-let mortgage lenders won’t accept your application unless you use an intermediary.|
|Consult a Tax Adviser or Accountant||For help setting up a limited company for buy-to-let purchases, consult a tax adviser/accountant. They’ll be able to make sure everything is set up properly. You may want to approach a tax adviser/accountant before speaking to a mortgage adviser. That way, your limited company can be set up and you’ll be ready to start the mortgage application process when you first speak to your mortgage adviser. Nonetheless, if you want some more information before setting up your limited company, then give us call on 03304 332 927 and we’ll answer your questions.|
How Can John Charcol Help with Limited Company Mortgages?
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Our Purchase/Refinancing Process
1. Meeting with Adviser and Mortgage Research
When you phone us, you can either arrange a phone appointment with your adviser or a face-to-face meeting – whatever suits you. Your adviser will ask you some questions and, once they have all the information they need, they’ll go away and find you the buy-to-let mortgage for your circumstances and future needs. They’ll also arrange a follow up call to present you with what they’ve found. It may require more than one conversation to gather all the right information, depending on where you are in your property search.
2. Decision in Principle
Once you’re happy with their recommendation, you adviser will go about securing your DIP (Decision in Principle) - which is basically a promise from the lender that they’ll loan you money on the condition that the information you’ve provided is correct and subject to a valuation of the property.
3. Offer on Property/Refinancing
After you’ve secured a DIP (Decision in Principle), you’ll be in a great position to make an offer on a property or move forward with refinancing and possibly changing ownership from private landlord to limited company.
4. Pre-Application and Submission
Following the acceptance of your offer, we’ll send you some information which explains all the documents we need to submit to the lender. You’ll be assigned a client relationship manager who’ll check and submit certified copies of your documents; they’ll liaise with both you and the lender. Your adviser will then submit the fully packaged mortgage application.
5. Lender Underwriting and Valuation
The lender will underwrite your application; this basically means they’ll verify the information you’ve provided and review all your documents for themselves. They’ll also instruct a valuation for their purposes on the property.
6. Mortgage Offer
If the lender is happy with everything they’ve found, they’ll send you a mortgage offer. They’ll also send us a copy.
After you’ve accepted your mortgage offer, you’ll go through the legal part of the process, known as conveyancing. This is where the solicitors/conveyancers draw up contracts and organise the actual, legal purchase of the property/refinancing. If buying, you’ll also need to arrange buildings insurance at this stage, making sure it’s in place from exchange.
8. Exchange and Completion
Once everything is in place, your conveyancer/solicitor will exchange contracts with the seller’s conveyancer/solicitor. It’s at this point that you put down your deposit and are legally bound to buy the property. You’ll lose your deposit if you pull out after exchange. The purchase completes when money is transferred on an agreed-upon date. As soon as you have a date for completion you’ll know when the property can take tenants, therefore you can start speaking to a letting agent. If you’re refinancing, then your conveyancer/solicitor will set a date to draw down the funds and pay off any existing lender(s) once the mortgage offer’s released.
LTD Company Mortgage FAQs
What’s the Difference Between a Limited Company, LTD and SPV Mortgage?
- A limited company is a company that’s owned by private investors; it’s not on the stock exchange. These investors are legally responsible for the company’s debts, but only to extent of the amount they’ve invested
- An LTD company is the same as a limited company, therefore an LTD company buy-to-let mortgage is the same as a limited company buy-to-let mortgage. Some people simply prefer to use “LTD” instead of “limited”. It’s entirely an aesthetic choice
- An SPV (Special Purpose Vehicle) is a limited company which is set up specifically to manage properties. You set one up precisely for the purpose of taking out a limited/LTD company buy-to-let mortgage
How Do I Set Up a Limited Company/Get an SPV for a Buy-to-Let Mortgage?
To take out a buy-to-let mortgage through a limited company, your limited company needs to have been set up with the purpose of buying/selling/managing property.
If you don’t already have a suitable limited company, you can set up an SPV. An SPV is a company you set up to buy/sell/manage property, specifically so that you can get a buy-to-let limited company mortgage.
It’s important you speak to an accountant as they can help make sure that your SPV is set up with certain SIC codes and definitions in mind.
See our guide for how to set up a limited company for buy-to-let purchases and for information about SIC codes.
Can a Limited Company Get a Buy-to-Let Mortgage?
You can take out a buy-to-let mortgage through a limited company. The buy-to-let property you purchase with the mortgage will be owned by the limited company. Many people choose to do this - rather than take out a buy-to-let mortgage and purchase a property as a private landlord - because it can be much more tax-efficient and better for Inheritance Tax purposes.
What Are the Criteria for a Limited Company Mortgage?
The criteria for limited company buy-to-let mortgages are fairly similar to the criteria for normal buy-to-let mortgages.
There are a couple of things to bear in mind though:
- The limited company has to be set up/have been set up with the purpose of buying/selling/managing property
- The assessment criteria for limited company mortgages can vary from lender to lender
- The lender will often consider the personal financial history of the company director(s) and will usually require that the director(s) personally guarantees the debt
- There’s usually no minimum time that the company has to be incorporated for
How Many Mortgages Can I Have Through a Limited Company?
You can have as many mortgages as your lender will allow. Some lenders will let you have up to 4 or 5 mortgages with them. They’ll also often have a limit on the total amount you can borrow with them and a total borrowing limit across all lenders.
If the overall figure you want to borrow becomes too high then you’re essentially running a commercial operation and should therefore take out a commercial mortgage(s).
Are Buy-to-Let Mortgages for Limited Companies More Expensive?
Buy-to-let mortgage rates tend to be a little bit higher for limited companies than for private landlords. You can view current rates using our best buy tool above.
Do I Need a Commercial Mortgage?
You’ll need a commercial mortgage if the overall figure you want to borrow across lenders is too high for a limited company buy-to-let mortgage.
What our customers say
John Charcol0330 057 5173£
Cutlers Exchange, 123 HoundsditchLondonEC3A 7BU
1923 Total reviews
Razz provided fantastic support throughout the whole process, Customer service is second to none. We thought applying for a mortgage was going to be very stressful but thanks to Razz this was not the case. Highly recommend.Posted
Daniel Dordan-Pike is exceptional. Quick, effective and proactive with everything from start to finish. We discussed my options on Wednesday afternoon and he had me a mortgage offer by Friday Morning of the same week!!! Unbelievable, never going anywhere else again! Then his support staff, Samanatha Walker and Samantha Remfry where just as good - Totally top draw company and people.Posted
This company are the best, They are very professional and supportive, during the process of buying our own house, from the first step to the final step, Adrian has been very helpful, when I am confused or don't understand anything, I will give him a ring and he picks up straight away as i called him. Adrian and Megan have been of a very great help, updating us and most especially the challenging times when we almost gave up, they were there to support us. I recommend John Charcol and I will use them again and again. Thank you guys you are so amazing.Posted
I worked with Lawrence to find both (i) a mortgage for a new house purchase and (ii) to put in place a let-mortgage on my existing flat. Lawrence delivered a great result and was quite simply outstanding throughout. I would recommend him to anyone (and have!)Posted
Razz was our mortgage advisor and was great from the outset! He took on board everything we asked for and was able to secure us a product that suited our circumstances. Razz was always on the end of the phone for reassurance throughout our whole buying process, even when I was having a meltdown when our exchange of contracts fell through although this wasn't even his remit! thankfully with his calming voice and professionalism he reassured me it was just a blip, we are thankfully is our dream home and we have Razz to thank massively for all his help guidance and support on our journey. Highly recommended and we will definitely be in touch in the future, Charcol you have a diamond in Razz 🙂! ⭐⭐⭐⭐⭐Posted
I spoke to Manny about possible mortgage options. The service was excellent. Very knowledgeable. It was great to receive that level of service. I have high confidence in taking things forward.Posted
We recently completed the purchase of a home with Sarah Dormer acting as our mortgage broker. She is wonderful! From our first conversation in 2019 when we were just thinking of buying a home, to helping advise us throughout the pandemic in 2020, and into 2021, Sarah has been incredible. As first-time buyers we felt like she was truly invested in our success. She and her colleague Michelle were quick to respond to any question or update to our mortgage offer, so much so that our estate agent asked if she could refer Sarah's details to her other clients. Buying a home can be stressful and uncertain, but we always felt confident that Sarah and Michelle could help guide us through it. Thank you so much!Posted
Louise Cheatle and Daniel Dordan-Pike have been extremely helpful and diligent in getting our sales and purchase complete, even with he mortgage company putting a spanner in at the last minute! thank you both for always being available and following up to ensure the mortgage was sorted out.Posted
Just fantastic service from start to finish. Steven was extremely knowledgeable and was able to take through all options to ensure we were comfortable with our decision.Posted
Excellent Service. They are truly worth every penny.Posted