Increasing and decreasing

Lloyds Bank announces it is reducing its interest rate by ‘up to 30 basis points’ across its Commercial Mortgage range for Real Estate and Healthcare.

BM Solutions (a member of the Lloyds Banking Group) announces that from tomorrow February 16th 2018 its fixed rate and tracker Buy to Let Purchase products will increase by 0.2%. To be fair, BM’s products had recently looked very attractive in comparison with the market so this adjustment is probably expected.

Property Investing using a Limited Company

Why buy Properties in a Limited Company name?

Buy to Let mortgage lenders – if the borrowing is in a limited company name – will invariably expect directors to give personal guarantees so the reason for borrowing in a limited company name is not to escape personal liability.

Buying properties in a limited company may be beneficial from a tax point of view although ibmco does not advise on tax and we strongly recommend to that you seek professional tax advice before making any property investment decisions.

Also, limited companies are not subject to the stricter affordability checks on personal Buy To Let borrowing which was introduced by the Prudential Regulation Authority on 1 January 2017. This means that a limited company may be able to borrow more against a property than a landlord borrowing personally.

Limited companies pay Corporation Tax, not Income Tax, and as such are not affected by the changes to tax relief on finance costs for personal BTL borrowers. However, the owners of the company will then need to extract the net income from the company – usually by way of salary or dividends – at which point income tax on the salary and/or dividends will become due. Everyone’s circumstances are different so please take professional tax advice.

Borrowing in a Limited Company name – the application process.

Generally speaking, when assessing a Buy to Let mortgage application, lenders will carry out background checks on the directors/shareholders just as they would on individuals applying in their own names. Therefore there is very little difference in the application process.

The depth of the underwriting may depend on the number of properties owned (lenders carry out more detailed underwriting on portfolio landlords) – but this is true of both individuals and companies. If an application is made in the name of a brand new company, clearly the company itself has no history to check, so the underwriting must be based on the shareholders/directors. (It is perfectly acceptable if buying a property for investment purposes to apply for a mortgage in the name of a brand new company).

Most Limited Company Buy to Let applications are in the name of SPV companies. SPV means Single Purpose Vehicle and means that the company is formed solely for the purpose of property investment. More about this below. However if you are borrowing in the name if a company which also trades in another way the application may be more complicated as the lender will need to examine the company’s trading history and financial strength as well as the proposed property transaction.

Advantages and Disadvantages of borrowing in a Limited Company name.

It may be possible to borrow more on a Buy to Let mortgage in a Limited Company name than in a personal name. This is because lenders take into account the borrower’s potential tax liability in their affordability calculations. They will expect the rent which a property generates to cover the interest cost by a certain margin and this margin will be higher for higher rate taxpayers. (Remember that gross rental income for individuals is now counted towards taxable income so many landlords will be in higher tax brackets). Application of this rental assessment may put an upper limit on the amount that can be borrowed. Limited companies are not subject to the same tax rules so are usually assessed on the least restrictive affordability calculation equivalent to a basic rate taxpayer.

On the other hand, not all Buy to Let lenders will lend to limited companies so the choice of lender narrows (although there is still a good range of lenders for limited companies). In effect the interest rate a limited company pays may be slightly higher than could be achieved in an individual name. But these days there are competitive terms available for companies.

Some limited company lenders have no restriction on the upper age of directors.

Setting up a Limited Company to invest in property

You can of course ask your accountant to set up a Limited Company for you, but the process is very simple and you can do it yourself at a cost of around £15. See

Once set up you will have some responsibilities such as filing accounts annually and an annual ‘Confirmation Statement’.

Part of the set-up process is choosing an SIC (Standard Industrial Classification) code for the company. A company can have several codes, but we’d suggest the correct ones to make sure your company is an SPV vehicle are :
68100 Buying and selling of own real estate and 68209 Other letting and operating of own or leased real estate
Apart from the incorporation of a company you can only change the SIC code when filing the annual Confirmation Statement but since you can choose to file the annual statement at any time this doesn’t cause much restriction. Therefore you can re-classify an existing company to make it into a SPV property investment company. An example would be where the owners of a trading company owning its own premises decide to retire or close down the trading business and in future simply rent out the company’s property.

Does it make sense to transfer properties in personal name into a Limited Company?

Legally, you can’t simply ‘transfer’ properties into a limited company, what you have to do is to sell the properties at market value to the company. This means (a) that you may create capital gains tax liabilities for yourself and (b) the purchase by the company will be subject to the current rates of stamp duty, including the additional rate for property not purchased for residential use.

Please consult your accountant or tax adviser.

Houses in Multiple Occupation (HMOs)

A HMO is defined as a house where multiple unrelated tenants have exclusive access to their rooms but share common areas such as kitchen and bathroom.

The tenants may all sign one and the same joint tenancy agreement, or each may have their own tenancy.

Properties of 3 or more storeys and occupied by 5 or more unrelated occupants are required by law to be licenced by the Local Authority. Different local authorities have different rules regarding properties of less than 3 storeys or less than 5 occupants so it’s important to check the rules for your area. Licencing requires adhering to rules regarding safety standards.

Tenants in this type of property include for example students, tenants on benefit support, tenants placed by the local authority, asylum seekers and of course working people.

Generally speaking such properties require more hands-on management by the landlord but there is often a high rental return which is why such properties are attractive to property investors. Sometimes the entire property can be leased to a specialist property management company which then assumes responsibility for letting and maintaining the property.

ibmco has a panel of lenders who will provide Buy to Let mortgages for HMO properties and welcomes enquiries.

In 2018 further legislation is expected which, if the government’s consultation document is followed, will extend licencing requirements in England to any property occupied by 5 or more tenants if more than two of them are unrelated irrespective of the number of storeys. Requirements may include minimum room sizes as well as stricter checks on landlords applying for licences and rules governing refuse disposal. We await further developments.

BM Solutions new Buy to Let Purchase products

BM Solutions announce two new products for Buy to Let purchases only

1.45% 2 years fixed up to 60% loan to value

1.86% 2 years fixed up to 75% loan to value

Product fee £1,995.

BM also offer remortgage products with free valuation and legals but rates differ from those quoted above.

BM lend throughout the UK, to individuals (not companies)

Subject to BM’s criteria please contact ibmco for further information.

Portfolio landlords 5 year fixed rates from Foundation Homeloans with £500 cashback

In addition to their standard range, Foundation announce products for portfolio landlords only ( 4 or more mortgaged properties) with £500 cashback

Standard Properties 3.89% fixed until 30 April 2023

HMO Properties 3.99% fixed until 30 April 2023

Up to 70% loan to value, individual or limited company applicants. £500 cashback on completion of the loan. 1% arrangement fee.

Rental calculation allows up to 212 times (for individuals) or 240 times (for companies) monthly rent.

Contact ibmco for further details


No portfolio limit on New Street Mortgages applications

There is no longer a limit on the number of properties a landlord owns when applying to New Street Mortgages. Subject to a maximum exposure with New Street of £2m per client.

As part of the Kensington Mortgage group New Street hope to start lending in Scotland shortly (see earlier post) – currently lending on properties in England and Wales.

Further information available from ibmco, please get in touch.

Limited Company Buy to Let from Fleet Mortgages

Fleet Mortgages 5 year fix for Limited Company Buy to Let

3.89% fixed until 31 March 2023, up to 75% loan to value, product fee 1.5%

Rental calculation 125% at 3.89% in other words up to 246 times monthly rent

Contact ibmco for more information

5 year fixed Buy to Let from Nottingham Building Society

Nottingham BS extended the end dates on its 5 year fixed BTL products which are now fixed until 1 May 2023:

2.65% up to 65% loan to value

2.89% up to 75% loan to value

Product fee £999 (£299 upfront)

Contact ibmco for further details