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  • Writer's pictureMatthew Pigrome

Debunking the Top 6 Myths about Buy to Let Mortgages via Limited Companies

Authored by Matthew Pigrome

Over the past half-decade, buy to let mortgages through Limited Companies have seen a surge in popularity. Despite this, a variety of misconceptions about this investment avenue persist.

Debunking myths to empower your property investment decisions.

Utilising a Limited Company for buy to let investments has its unique advantages, and its growing popularity reflects this. Yet, prevalent myths about this investment option could potentially deter you from venturing down this path.

Here, we break down the six most common myths about investing in property through Limited Companies and offer insights to guide your investment decisions.

Special Purpose Vehicles (SPVs) vs. Limited Companies

Confusion often arises regarding the term 'SPV' and how it is different from a Limited Company. To clarify, they are one and the same. An SPV Limited Company is specifically formed to buy and rent out property.

When you register your Limited Company with Companies House, you'll choose the appropriate SIC (Standard Industrial Classification) code for taxation and industry classification purposes. Typical SIC codes for property-related Limited Companies are 68209 or 68100.

Years of Accounts Are Needed for a Limited Company Mortgage

Contrary to popular belief, you can establish an SPV Limited Company today and apply for a mortgage as soon as tomorrow. Many lenders will accept unsupported personal guarantees from the Company’s directors and shareholders, assessing your mortgage application similarly to those for individual buy to let mortgages.

Mortgages Through Limited Companies Are Costlier

Not always true. With rising demand, more lending institutions have expanded their Limited Company mortgage offerings, making pricing more competitive. Sometimes, the rates are identical for both individual and Limited Company applicants. Nevertheless, the cost-effectiveness will depend on your individual tax situation. While we can't offer tax advice, we can help you compare rates to inform your and your tax advisor's decision-making.

Stamp Duty Surcharge Doesn’t Apply to the First Property Purchase by My Limited Company

Incorrect. The 3% surcharge is applicable for property purchases through corporate entities like SPV Limited Companies, regardless of your personal circumstances. Use our stamp duty calculator to determine your potential cost.

Poor Credit Is Irrelevant if I Borrow Through a Limited Company

Incorrect. Lenders will review the credit history of the individuals behind the Limited Company since they provide the personal guarantees. A poor credit history could be a stumbling block.

Transferring My Personal Buy to Let Property to My Limited Company Is Simple

The term 'transfer' can be misleading in this context. Effectively moving a personally owned property into a Limited Company is treated as a sale and a subsequent purchase, also known as 'incorporation.' Your Limited Company will have to acquire the property at market value and pay the necessary stamp duty and potential capital gains tax. Always consult a tax professional before making such a decision.

How We Can Assist Your Limited Company Buy to Let Investment

Whether you're a newbie in the buy to let scene or looking to consolidate a personal portfolio into a Limited Company structure, our skilled team is here to guide you.

To explore your next Limited Company buy to let investment, reach out to our knowledgeable brokers at Mortgage321.


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