Mortgage through my company

dipsldn

Hello all, 

i am in need of some advise. I have a company has been running for over 2 years now, the profit in first year was slightly at a loss but last year was 40k profit and this year is maybe around 20/30k profit. I would like to use my ltd company to obtain a mortgage. Can anyone please advise on what I should be doing to put myself in the best position to succeed ? I’m looking to borrow 250/300k and I have about 50/60k I can put together. As I read most of them require 20% deposit. The company sells goods online through e-commerce sites. Will that matter ? As I read it had to be a SPV only company ( I added that on companieshouse recently ) 

thanks in advance. 

Brie

Is it to buy a home for yourself?  If so then what will matter is your income from the company rather than its profits.  Some banks have gone back to offering mortgages with 95% LTV but given the interest rates currently I think you should aim for as little borrowing as you can to get what you want.

If it's to buy premises for the company then you should be looking at a business loan not a mortgage and profit may come into that.

kingstreet

You will probably need an SPV for a BTL property purchase.

K_S

@dipsldn   

If it's to buy a home to live in as your main residence - The mortgage will have to be in your personal name, you will not be able to get a mortgage in the company's name. For the deposit you will need to get the money out of your limited company to yourself. For affordability, different lenders have different policies but very very generally speaking it'll either be based on director's salary + dividends or director's salary + share of net profit (which will usually work out better for clients who keep retained earnings within the company)

If it's to buy a property to rent out - You will need a limited co BTL mortgage. Typically, landlords in your scenario will try to keep their trading company and property SPV separate, and for the deposit they'll use some form of intercompany loan. This is just an example, it may or may not be what's best for you. If you want to buy within the trading company, typically you'll have a much smaller choice of lenders.

If it's to buy premises related to the business (warehouse, etc.) - that would be a commercial mortgage/loan

dipsldn said:

Hello all, 

i am in need of some advise. I have a company has been running for over 2 years now, the profit in first year was slightly at a loss but last year was 40k profit and this year is maybe around 20/30k profit. I would like to use my ltd company to obtain a mortgage. Can anyone please advise on what I should be doing to put myself in the best position to succeed ? I’m looking to borrow 250/300k and I have about 50/60k I can put together. As I read most of them require 20% deposit. The company sells goods online through e-commerce sites. Will that matter ? As I read it had to be a SPV only company ( I added that on companieshouse recently ) 

thanks in advance. 

dipsldn

Brie said:

Is it to buy a home for yourself?  If so then what will matter is your income from the company rather than its profits.  Some banks have gone back to offering mortgages with 95% LTV but given the interest rates currently I think you should aim for as little borrowing as you can to get what you want.

If it's to buy premises for the company then you should be looking at a business loan not a mortgage and profit may come into that.

Hello, thanks for your response. No it will be let out. But I’m hoping to transfer it to my name further down the line.

dipsldn

kingstreet said:

You will probably need an SPV for a BTL property purchase.

Thanks. Do you know the process in getting an SPV ?

simon_or

dipsldn said:

kingstreet said:

You will probably need an SPV for a BTL property purchase.

Thanks. Do you know the process in getting an SPV ?

An SPV for BTL is just a fancy name for a Limited Company whose only purpose is to own one or more rental properties.

So you would just open a new limited company, use the appropriate SIC code (one of 3-4 property related SIC codes) and then that company would get a mortgage to buy the rental property.

To fund the deposit, you could either advance a Director's loan to this new SPV or your trading company could advance a loan to the new SPV limited company.

BTL mortgages for SPVs are very competitive now, lots of lenders offering them.

silvercar

dipsldn said:

Brie said:

Is it to buy a home for yourself?  If so then what will matter is your income from the company rather than its profits.  Some banks have gone back to offering mortgages with 95% LTV but given the interest rates currently I think you should aim for as little borrowing as you can to get what you want.

If it's to buy premises for the company then you should be looking at a business loan not a mortgage and profit may come into that.

Hello, thanks for your response. No it will be let out. But I’m hoping to transfer it to my name further down the line.

That’s creating a headache further down the line. You would need to buy it off the company, paying appropriate SDLT and the company paying CGT.

gazfocus

simon_or said:

dipsldn said:

kingstreet said:

You will probably need an SPV for a BTL property purchase.

Thanks. Do you know the process in getting an SPV ?

An SPV for BTL is just a fancy name for a Limited Company whose only purpose is to own one or more rental properties.

So you would just open a new limited company, use the appropriate SIC code (one of 3-4 property related SIC codes) and then that company would get a mortgage to buy the rental property.

To fund the deposit, you could either advance a Director's loan to this new SPV or your trading company could advance a loan to the new SPV limited company.

BTL mortgages for SPVs are very competitive now, lots of lenders offering them.

Just a quick question on the back of this...what determines how much you can borrow on a mortgage to a newly formed SPV for BTL? Is it purely based on the rental income for the property? What checks do the lenders do on the director(s) of a newly formed SPV?

I'm just curious as obviously you can't form a new ltd company and borrow say £200k straight away without any trading profits and most of the time a directors guarantor, so just wondering what makes a property SPV different.

K_S

@gazfocus Generally speaking, it's purely based on the rental income, with the lender stress tests applied. Like normal BTL mortgages, it's usually up to 75% LTV so there's plenty of security for the lender as the ltd.co. will need around at least 25% deposit.

Typically (the specific criteria will differ across lenders), the application process will involve a credit check on the Director, require a personal guarantee, may have minimum personal income requirements for the director, may have a minimum landlord experience requirement, etc.

gazfocus said:

simon_or said:

dipsldn said:

kingstreet said:

You will probably need an SPV for a BTL property purchase.

Thanks. Do you know the process in getting an SPV ?

An SPV for BTL is just a fancy name for a Limited Company whose only purpose is to own one or more rental properties.

So you would just open a new limited company, use the appropriate SIC code (one of 3-4 property related SIC codes) and then that company would get a mortgage to buy the rental property.

To fund the deposit, you could either advance a Director's loan to this new SPV or your trading company could advance a loan to the new SPV limited company.

BTL mortgages for SPVs are very competitive now, lots of lenders offering them.

Just a quick question on the back of this...what determines how much you can borrow on a mortgage to a newly formed SPV for BTL? Is it purely based on the rental income for the property? What checks do the lenders do on the director(s) of a newly formed SPV?

I'm just curious as obviously you can't form a new ltd company and borrow say £200k straight away without any trading profits and most of the time a directors guarantor, so just wondering what makes a property SPV different.

MWT

K_S said:

Typically (the specific criteria will differ across lenders), the application process will involve a credit check on the Director, require a personal guarantee, may have minimum personal income requirements for the director, may have a minimum landlord experience requirement, etc.

This is the bit I would prepare for, as this...

dipsldn said:

I have a company has been running for over 2 years now, the profit in first year was slightly at a loss but last year was 40k profit and this year is maybe around 20/30k profit.

... isn't going to be any help, so you will need to be able to show other income/assets to support your ability to be a credible guarantor...

Also may get some close questioning if you do not personally own your own home as well...