The Limited Company Race

Now, more than ever, investors are often looking to purchase property within a Limited Company – specifically known as a Special Purpose Vehicle (usually for the sole purpose of buying, letting and selling real estate).

Naturally, I cannot go in to all the reasons why people often purchase in a Limited Company (best to speak to an accountant or tax adviser!), but with lenders there are usually a number of benefits. Firstly, lenders won’t usually take into account the individuals who own the Limited Company’s tax position. In a personal name, if you’re a higher rate tax payer, the mortgage loan is stressed differently to how it would if that person was a basic rate tax payer. In essence, as a higher rate tax payer, a lender would usually lend less money. In a Limited Company, however, lenders would typically stress the loan the same as if a basic rate tax payer.

This makes the rent go further, on the whole, allowing a broader range of properties to consider. Also, it takes the loan outside the individual’s personal liability. Granted, more often than not a personal guarantee is required, but that mortgage held by the Company is unlikely to be of interest to a lender when applying for a residential mortgage for someone to live in.

Interestingly, and akin to the title of this post, lenders have lately been somewhat ‘racing’ to join the Limited Company offering. Now, the offering has by no means been sparse over the years, with plenty of lenders offering a solid option to investors. But as of late, we’ve seen the more mainstream lenders join the field. In the industry, there’s been news of giants such as Birmingham Midshires (part of Lloyds Banking Group) joining the Limited Company space, and with that in mind it seems as though many lenders have been working behind the scenes on policy, criteria and systems to make it happen.

One of the biggest in the space has been The Mortgage Works, part of Nationwide Building Society, who have been somewhat of a go-to in the industry since 2018. There are a number of specialist lenders that offer an exceptional option for clients who have more complexities, or are buying properties that aren’t just the everyday tenancy agreement.

But, with the news of Birmingham Midshires joining the race, we’ve seen others come in too. Coventry Building Society now offer Limited Company lending, also Natwest have recently announced that they’re joining the field alongside specialist lender, Landbay. We’ve also seen other lenders like Metro join the space, and even Barclays have acquired Kensington in order to compete.

On the whole, Limited Company buy to let is consistently a popular option – not only to keep property portfolios in one vehicle, keep the loans outside of direct personal liability and also to sometimes get a better loan amount offering, but also as investors seem to consider selling their entire holding as a property company rather than selling individual properties.

I’m interested to see how lenders continue to adapt, improve and compete with one another in order to gain market share. On the whole, positive adjustments are going to ultimately benefit the borrower and hopefully streamline the industry as a whole.

With systems getting smarter, where information can be pulled directly from Companies House with some lenders when proceeding with a Limited Company mortgage application, I feel that it’ll become the option of choice for many and make property investing, potentially, more accessible.

Jonathan Fowler

Founder & Managing Director