Property investment finance for Limited company structures
A growing number of property investors now hold or are considering holding their buy-to-let portfolios within a limited company, often referred to as a Special Purpose Vehicle (SPV).
The primary driver is usually tax efficiency, following changes to the rules on mortgage interest relief for individual landlords.
Limited company buy-to-let finance is a specialist area. The lender is lending to the company rather than to an individual, which changes how the case is assessed. Rates, criteria and lender appetite differ from personal buy-to-let mortgages, and not every lender in the market will consider company structures.
Take professional advice before choosing a structure
The decision to hold property personally or through a limited company has implications beyond just the finance. It affects your tax position, the costs of transferring existing properties, your personal liability and your long-term exit strategy from the portfolio.
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We would always recommend taking independent tax and legal advice before making decisions about company structure. We can arrange the finance once the structure is determined, but the structural decision itself is one for a qualified accountant and solicitor who understand your full financial position.
How limited company buy-to-let finance works
The mortgage is taken out in the name of the limited company. The lender will assess both the company and the individual directors, and will typically require personal guarantees from the directors.
The rental income of the property being financed needs to meet the lender's rental coverage requirements, which vary between lenders.
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Interest rates for limited company buy-to-let are typically slightly higher than for personal buy-to-let mortgages, though the gap has narrowed in recent years as the market has developed and more lenders have entered the space.
What lenders look at
The company: trading history, purpose and financial position
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The directors: personal financial position, credit history and property experience
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The property: type, location, condition and rental valuation
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The rental income: whether it meets the lender's interest coverage ratio (ICR) requirements
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Portfolio size: some lenders apply different criteria to portfolio landlords, typically defined as those with four or more mortgaged buy-to-let properties
Portfolio landlords
Lenders are required to apply additional scrutiny to portfolio landlords under Prudential Regulation Authority (PRA) guidelines. This means lenders will assess the entire portfolio, not just the property being financed, when a borrower holds four or more mortgaged buy-to-let properties. Portfolio landlords should be prepared to provide a full schedule of their existing properties, mortgages, rental income and void periods as part of any new application.