Choosing whether to buy a property as an individual or through a limited company is a decision that can impact the yields of buy-to-let property investors.
There are a number of factors that contribute to this decision, including:
-How long the properties will be owned for;
-When you want to sell up;
-How much income you are looking to extract;
-The other income sources you have.
The recent changes to buy-to-let mortgage interest tax relief and the stamp duty hike on second homes means more and more buy-to-let investors are thinking about switching to a limited company.
In the mortgage world, there are two types of buy-to-let limited company:
– Special Purpose Vehicles (SPVs), which hold property and do nothing else;
– and trading companies.
While some lenders will consider trading companies, most will only lend to SPVs.
The SPV itself can be a new company with no prior record of trading, some lenders actually prefer this as the assets are kept separate without any risk associated from a trading company.Certain areas the lenders may wish to consider will be specific to the directors of the company, such as their financial history, and in certain circumstances will require personal guarantees which they’ll need to underwrite the mortgage.
Limited company buy-to-let mortgages are more popular than ever
In recent months, specialist brokers have seen a surge in the number of applications for buy-to-let mortgages from limited companies as landlords look for a way around the changes. Investors are increasingly using corporate structures to access loans due to the tax efficiencies associated with this approach. This is particularly the case for higher rate tax payers, or those who have been tipped into the higher tax bracket by the recent changes.
What are the benefits of this approach?
Setting up a buy-to-let limited company does not just benefit investors with a substantial portfolio of properties. When you hold a property through a limited company you pay corporation tax on the profits made. If you leave the profits in the company, this is the only tax you will have to pay. This could represent a significant advantage for some when compared to owning property personally.
Is this type of mortgage hard to find?
As the demand for limited company buy-to-let mortgages has increased, so has the number of products available. As a mortgage broker that specialises in this field, we know exactly which lender to approach to find the right deal given your particular circumstances.
How can we help?
With specialist limited company buy-to-let mortgage advisers, we know exactly where to turn to find a deal that meets your specific needs. Our ongoing working relationships with a network of leading lenders means we may even be able to access better rates than if you approached the lender yourself. For more information, please contact our team today.