Buy to let limited company mortgages
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Limited company buy to let mortgage criteria
The criteria for a limited company buy to let mortgage is very similar to a conventional buy to let mortgage. You will need to have at least a 15% deposit and a minimum rental income of 125% of your monthly mortgage payment. However, obtaining this type of mortgage without specialist help can be tricky.
As only a select number of lenders offer limited company buy to let mortgages, you generally need to use a broker to obtain this type of mortgage. A specialist mortgage broker like Fosters Financial, knows each lenders’ criteria and can help you get the best deal for your needs.
They will take the time to understand your financial goals and if they find a suitable deal that you are happy to apply for, they will manage your entire application for you.
Interested in discussing your options? Get in touch and speak to one of our experts or request a free quote here today!
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Benefits of buying through a limited company
Whilst a buy to let limited company mortgage will not suit every investor’s needs, there are several perks that can help to significantly reduce your tax bills including:
Corporation tax: You do not need to pay Income Tax on the profits generated from your rental income, which can be as much as 45% for higher-rate taxpayers. Instead, you pay Corporation Tax, which is capped at 19%. Although this is expected to increase to 25% by 2023, it is still far cheaper for landlords who meet the higher rate tax threshold or have a growing portfolio of properties.
Offsetting expenses: Rental income expenses such as mortgage interest, are deemed as business expenses and can therefore be deducted to help reduce your tax bill. Unlike, private landlords who can only claim a 20% tax credit on their mortgage interest payments.
Inheritance tax: Holding rental property in a limited company instead of your own name, can also help you to avoid a hefty inheritance tax bill, if you want to leave it to your loved ones.
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Things to consider
A limited company buy to let mortgage can be a tax-efficient option for many landlords. But there are also a few downsides including:
Capital Gains Tax (CGT): As you do not pay Capital Gains Tax on rental properties held by a limited company, you do not receive a CGT allowance when you sell a property.
Additional costs: If you don’t already own a limited company, you will need to consider the extra costs this will incur.
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Most Buy-to-Let Mortgages are not regulated by the Financial Conduct Authority.