Limited company mortgages used to difficult to get hold off. But, in the past few years they have become more common place and therefore easier to find through a mortgage broker. They are a useful consideration if you are buying a second home.
They are popular because there are certain tax benefits to buying a property as a limited company. From April 2017 through to April 2020 tax changes mean that individuals won’t be able to claim mortgage interest as an allowable expense, but companies can.
If you are a higher rate tax payer, it might benefit you to take out a limited company mortgage. If you plan to keep the property or properties to pass on to relatives in the future you could also save on Inheritance Tax. Your accountant will be able to advise you on the pros and cons of this type of investment.
A lender will look at various factors before deciding whether to give a company mortgage. Firstly, they will want to see if the company is already trading or if it is a brand-new company.
They will also want to know if the business is a property company. If it is it means it is an SPV (Special Purpose Vehicle Company). Lenders tend to look at mortgages for SPV companies more favourably because it is likely that they have been bought as buy to let properties.
Companies that aren’t SPV’s may need to produce a larger deposit. In all probability you’ll need around 25% of the purchase price.
Taking out a mortgage through your company doesn’t mean that you won’t be held responsible if the company gets into financial difficulty. Most lenders will ask for a guarantee from the company’s directors. That means if things go wrong as a director you will be personally responsible for some or all of the debt.
Type of Company
A trading company might be a more attractive prospect to a lender because it will have financial records. That doesn’t mean a new company won’t get a mortgage. It means that the company director’s finances will be taken into consideration and they will need a good credit score.
Finding a Company Mortgage
If you have been advised that a company mortgage is beneficial to you, get yourself a mortgage broker. They will help you to find the best deals in company mortgages. They will also help you to apply for the mortgage and tell you exactly what paperwork you need to produce. A company mortgage is slightly more complicated than a traditional mortgage, so help from a broker will ensure the process runs smoothly.