One of the most fundamental shifts in the business buy to let market is taxation. Buy-to-let landlords often have to decide between what is easiest and more cost-effective. When it comes to a buy-to-let, setting up a limited company mortgage option may shave off a few thousand pounds in taxes. The Saffron Building Society recently opted to set up a limited company mortgage buy-to-let product that allows you to apply for better rates and conditions for their properties.

With the ever-changing tax laws that affect landlords, this option of going for a limited company off the bat may prove to be a little more cost-effective. A ltd company mortgage could make all the different to your investment’s success. At Pro Buy To Let, we equip our clients with the best research to make an informed decision.

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Mortgage For Limited Company

A limited company mortgage is a simple process when dealing with the right intermediary or mortgage broker. The market is packed out with brokers who may advise their clients on the fastest application process. However, they forget to consider that their customers might be on the losing end of the deal. By dealing with a reputable intermediary or mortgage broker, potential investors will know what their options are, as well as the long-term ramifications of their decisions.

One of the most significant considerations is the price point a limited company can expect. Just recently, limited companies and selected two-year fixed rate and tracker mortgages received a substantial rate cut through a major mortgage financier. The two-year products enjoyed a 0.25% cut, while limited companies enjoyed a slightly higher 0.35% cut.

These offers exist to allow landlords some breathing room in a tight economy where stimulation is sorely needed. While property prices are reasonably stable, landlords seem to be reluctant to take on properties. This is due to pending legislation and tax proposals making it hard to enjoy a healthy profit from their properties. Limited company buy to let could be the most effective way of maximising your properties.

Dealing with an expert from day one can be the difference between making a profit and struggling. UK properties are in high demand, and knowing when, where, and how to enter the market will make a whole lot of difference. A limited company mortgage may even produce some positive results on the bottom line.

Limited Company Director Mortgage

One of the advantages of setting up a limited company is that the limited company director mortgage tends to offer far more than the individual. As a separate entity, setting up a limited company allows directors to show their net profit more easily than trying to prove income as an individual. While securing a loan as a company director might be slightly more complicated than for an individual with a nine-to-five job, it’s worth the additional paperwork.

To get the best deal, the company director will need to find a financier willing to consider net profit when extending the loan. Most businesses owners are understandably reluctant to take more from their business than necessary. This is due to personal taxation.

Most business people would rather keep this surplus for a rainy day and reinvest the profits back into the business. Financiers will take into account if you need to draw higher and the business’ net profit allows it.

For example, you may find a £240,000 loan is increased up to £400,000. However, remember that the bumped up facility might cost the bank more exposure than they’re comfortable with. This could result in a request for a higher down-payment or higher interest rate.

Limited Company Mortgage Criteria

If you’ve made the decision to go down the limited company mortgage route, it’s important to be proactive. There are quite a few boxes to tick before submitting any applications to the banks. There is the possibility that the bank will require some form of down–payment by means of savings, investments, gifts, etc so as not to put additional pressure on the company finances.

This means that the down payment cannot come from a loan. Keep in mind that some banks may also require the company to be operating for at least two years before extending finance. This can place quite a dampener on those who want to pursue this avenue for the first time. The wait is often worth it as ltd company buy to let can increase your returns.

While not impossible, it can be a little more difficult. Other documents that may be requested are the signed offer to purchase, company documents, and also information on all the directors. It’s worth mentioning that the directors will need to be in sound financial standing in order for a successful application to take place.

Is a Limited Company the right choice for buy to let?

Limited company buy to let mortgages offer the benefit of higher tax relief. As a private landlord with property in your own name, you are liable to pay income tax on your rental income. This is viewed as personal income by the HMRC and you could be pushed into a higher tax band, especially if you have additional forms of income.

A limited company buy to let mortgage setup also allows you to claim back certain expenses including mortgage interest. You may also be taxed on your full rental income, not just your profits.

One of the key advantages of this model is of course the protection of your assets. Your personal finances are safe if anything goes wrong with your new property. Limited companies provide limited liabilities for their directors.

Remember there are some instances where you will be held personally financially responsible. This include any personal guarantees you provide on any mortgages. Working with professionals with experience in ltd company buy to let mortgages will help ensure you make sensible decisions.

While it might take a bit more time and effort to set up a limited company for that next buy to let, the effort tends to pay off in the long run. Building a successful business in real estate and buy to let property can be hugely profitable. To find out more about our products and services contact the Pro Buy to Let team.