Ltd Company Buy to Let ?

Prothet_of_Doom

Okay, I've done a little research, and I'm looking for advice.

I work as a ltd company contractor, and have built up a buffer in my ltd company to cover the inbetween contracts.

Now as this is profit, corporation tax has been paid to HMRC, and I could take it as dividend with a 10% tax credit (effectively the Corp tax includes 10% personal tax)

What I actually want is for the ltd company to invest in a BTL using half the buffer as the deposit.

Having spoke to a couple of mortgage brokers, there seems to be an impasse. They don't deal in (and can not point me in the direction of a competitor that might) residential mortgages for a BTL in a ltd company name.

They advise either that I remortgage my own home (I have paid off a joint mortgage with my wife) and lend the business the rest, or that I take the money as dividend, and take out a BTL mortgage in my name and not that on the ltd company.

Now I can see thier ideas are workable, and before making a decision, I want to have all options on the table and do a full risk vs possible outcomes, best case, worst case, and most likely case, and then with all the facts and all the options decide.

So, has anyone any experience of taking on a BTL mortgage via a ltd company ?

TheMortgageAdviser

I think the advice you have been given from Brokers generally holds true. What you are looking at doing isn't impossible but it would fall under Commercial Lending rather than the traditional Buy To Let lenders who don't as a rule lend to limited companies. There are a few exceptions to this (Paragon for one) but I'm not sure they would go for what you're looking to do. Mortgage lenders have had their fingers burned lending to Limited companies over these last few years hence their caution and withdrawal from that area of the market with regards to Buy To Let.

You could try Paragon (without knowing your full details I couldn't say whether they'd accept this or not) but otherwise it would be the Commercial route or the alternative route suggested. Bear in mind that the Commerial route will tend to be much more expensive both on rate but definitely on set up fees.

Prothet_of_Doom

In what way would they get their fingers burned ? If a 50% deposit is put down, then even if house prices crashed again, they ain't going to loose out, when they repossess.

Anyway thanks for your suggestion.

TheMortgageAdviser

Prothet_of_Doom wrote: »

In what way would they get their fingers burned ? If a 50% deposit is put down, then even if house prices crashed again, they ain't going to loose out, when they repossess.

It's a good point and to a point you're right at that level of borrowing, even with the costs associated with repossessing a property they would still get their money back, it's just the hassle factor they want to avoid here.


No the "fingers burned" has come from higher loan to value stuff and with a Limited Company often comes Limited Liability etc. etc. and not to mention the amount of mortgage fraud that has been committed over the last few years as things have tightened up.


I'm not suggesting for one minute that applies only to Limited Companies as mortgage fraud has increased dramatically across all areas of lending.


It really is just a case of tightening up everywhere as lenders have become more risk averse. If they don't need this type of business, they've simply shut up shop to it and concentrated on the "vanilla" stuff.

ACG

There are 1 or 2 lenders who will do BTL mortgages in a companies name... but those lenders are very limited - which usually means higher rates.

I would not say its impossible to do without knowing a lot more information, which means the brokers you have seen may be correct or they may not know lenders who offer BTL in Ltd Co names due to it being more of a niche product.

holly_hobby

All BTL mortgages are fundamentally semi-commercial finance, and unregulated borrowing. Whether to an individual or trading property company - as they are essentially business funding.

Since the ARLA initiative in mid 90s, it opened up the market to non-prof landlords, and lower rates (prev to this it was referred to as semi-comm finance, available from Banks at SVR 1.5%+, and only to SE professional landlords). But it was this relaxing of regs, and re-branding of it as Buy To Let, that essentailly fuelled the property boom that then ensued.

You can only use your Ltd co to pch the property (even if you could get a mge, which although pretty achieveable prev to 2008, post the fallout is now tight), if your company is registered and permitted to hold property - you can't simply have say a Ltd Co as an IT contractor, and start using the same company to pch property.

So, this may depending on various issues, mean the set up of a separate Ltd Co to hold your BTLs within - and essentailly is really only of monetary benefit to portfolio landlords.

Additionally, you need to be aware that a BTL Ltd Company does not carry the tax breaks that a individual can enjoy (ie PRR relief, cgt exemptions, etc), also that it will be exposed to company creditors, AND if the company is wound up, with it being a company asset, you would either need to sell the property or if you wanted to retain it, pch it yourself from the company (if you are in the position to do so), as part of the winding up procedures, at market value, inc personal fees and taxes such as SDLT.

Your accountant should really be advising you on this, I presume you haven't yet discussed with them, so may be an idea.

What is the actual motivation for holding within a Ltd Co set up ?

Hope this helps

Holly x

Prothet_of_Doom

holly_hobby wrote: »

What is the actual motivation for holding within a Ltd Co set up ?

Because....erm...The Cash is there for the deposit...and if I take it out I'll have to pay more tax on it, and I like the legal and mental separation of personal and ltd company, and I can choose to not take the profit as personal income, and reinvest it, (having paid corporation tax)....

Prothet_of_Doom

holly_hobby wrote: »

You can only use your Ltd co to pch the property, if your company is registered and permitted to hold property - you can't simply have say a Ltd Co as an IT contractor, and start using the same company to pch property.

Can't I just tell Companies House that I now have 2 revenue streams ? Like I could tell them I'm both a mechanic and an IT consultant (I'm neither), or a farmer, and a dance troupe manager.

holly_hobby

Of course ..

But as noted, unless the Company have permissions to hold property, you'll have to take it out to fund the pch regardless ..... so its rather a chicken and egg situ.

I'd take as dividends, which means you'll also save on NI.

Holly

holly_hobby

Prothet_of_Doom wrote: »

Can't I just tell Companies House that I now have 2 revenue streams ? Like I could tell them I'm both a mechanic and an IT consultant (I'm neither), or a farmer, and a dance troupe manager.

No, your ltd company is registered under a trade, for example mine is financial services, so unless it has property trading registration, you'll fall foul of companies hse.

Really, you need to speak to your accountant whom will guide you as to what you can and can not do within your current co.

Holly

ACG

holly_hobby wrote: »

No, your ltd company is registered under a trade, for example mine is financial services, so unless it has property trading registration, you'll fall foul of companies hse.

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