Limited Company Buy to Let Remortgage
Andy Done explains how remortgaging your Buy to Let as a Limited Company works.
Whether you’re buying for the first time, moving, investing or remortgaging we’ve got it all covered.
Listen to the latest podcast below to find out more!
Can a limited company Remortgage a Buy to Let?
A limited company can be Remortgage a Buy to Let property, it’s very straightforward and is very similar to the normal Buy to Let process. The main difference is that the limited company is typically a Special Purpose Vehicle, which is set up for buying and renting property instead of using a trading company.
Can a limited company be refused a Buy to Let Remortgage?
Yes they can be refused, and it’s not usually to do with anything other than their credit score. Lenders will credit score the Limited Company Directors of the company, and if they’ve got a low credit score, this can have an impact.
However, there are lenders who will lend in these circumstances, and some companies even specialise in clients with low credit scores or who’ve had credit issues in the past.
How can a limited company get a Buy to Let Remortgage?
As soon as a limited company has been set up, you can apply for a Buy to Let Remortgage straight away. It’s best practice to apply for a business bank account as soon as possible, because the lender will want the direct debit to be paid from the business bank account named on the application.
The application will be in the limited company name and the directors of the limited company. The process is very similar to a normal Buy to Let Remortgage application other than that.
What sort of criteria does a limited company need to meet for a Buy to Let Remortgage?
The limited company normally has to have the correct asset codes. This is what the accountant will normally apply when they set up the company. These are the same for most lenders and there are about 4 to 6 different codes that people can use.
You have to be careful that there are not too many directors or shareholders, some lenders have a maximum of two directors. Others are happy to have more and some are happy if you have several shareholders, but their combined shareholding has to be below 20%. The other criteria is pretty standard and similar to the Buy to Let criteria.
What sort of documents does a limited company need for a Buy to Let mortgage?
The documents required are similar to a Buy to Let mortgage. As the directors are credit scored, the lender will usually ask for ID, pay slips, or if they’re Self-employed, annual tax calculations. They generally ask for the opening statement of the business bank account if it’s a new company, or if the company is already in existence, three months bank statements to show the rental income from existing buy to Lets and the mortgage payments being paid.
Lenders sometimes ask for a property schedule for limited company Remortgages, which shows how many properties a client already owns. They also sometimes ask for things like a business plan, but a Mortgage Broker will help the client with the paperwork.
What are the reasons for Remortgaging your Buy to Let as a limited company?
Limited company Buy to Let Remortgages have become a lot more popular since the change in taxation for landlords, and we always ask clients to speak to an accountant to make sure it’s the best thing to do. We’re not actually qualified to give advice on tax.
There are a number of pros to using limited companies, you can have multiple directors and shareholders of the company profiting from the rental income. It can be retained in the business to use for deposits for future purchases.
Lenders use lower stress testing for calculating affordability for limited companies compared to clients who are high-rate taxpayers. This means people can potentially borrow more than they would be able to in their personal names. Some lenders will allow you to borrow at higher Loan to Values than with an individual Buy to Let products.
There are also some cons, such as the products tend to have higher interest rates than normal Buy to Let products. The legal fees can be slightly more expensive and most lenders ask for personal guarantees, which can be a bit more costly. You’ll normally need an accountant for the business because it’s a limited company, and this can be a bit more expensive, but an accountant could discuss everything with you, look at the different figures and then decide which is the best way to proceed.
How can a Mortgage Broker like Mortgages Plain and Simple help?
A Mortgage Broker can give you advice and discuss your plans and long-term goals to help achieve them. They can explain all the options available and guide you through the process from start to finish.
They may have local contacts, such as accountants, tax specialists and solicitors who have a lot of knowledge in company Buy to Lets. They know the lender’s criteria and can find you the most competitive products for your circumstances.
An experienced mortgage broker who’s used to dealing with limited company Buy to Let mortgages will be able to explain the whole process to you, submit the application for you, deal with the underwriters to get the mortgage approved as quickly as possible, and help you complete the legal paperwork.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.