Can I get a buy to let mortgage through a limited company?

Which companies lenders will lend to

Most lenders in this market want a special purpose vehicle, an SPV. That means a limited company whose only activity is holding and letting property, registered at Companies House with the right SIC codes. The codes lenders look for are 68100, 68201, 68209 and 68320. A brand new SPV set up the week before the application is fine with almost every lender in this space. What is harder is a trading company, for example a plumbing firm that wants to buy its own premises plus a flat to let. A smaller group of lenders will consider trading companies, usually at slightly different pricing and with more underwriting questions.

Layered structures, such as a holding company owning the SPV, are accepted by some lenders and refused by others, so the company structure is worth confirming before an application goes in rather than after.

Deposits, rates and fees

Maximum loan to value is typically 75%, with a handful of lenders stretching to 80% at a price premium. Limited company products tend to be priced above the equivalent personal name product, often by around 0.3% to 0.5%, though the gap has narrowed as more lenders have entered the market. For illustration only, if a personal name five year fix sits near 4.9%, the limited company equivalent might sit near 5.3%. Arrangement fees are commonly 2% to 3% of the loan on the keenest headline rates, or a flat fee on higher rates, and lenders let you weigh one against the other.

A worked example

Take a £200,000 property bought inside a new SPV with a 25% deposit of £50,000, so a loan of £150,000. The rent is £1,050 a month, £12,600 a year. Lenders typically stress limited company applications at a 125% interest coverage ratio. At an illustrative 5.5% stress rate the rent required is £150,000 x 5.5% x 125%, which is £10,312.50 a year, or about £859 a month. The actual rent of £1,050 clears that comfortably. On an illustrative pay rate of 5.29% interest only, the monthly payment is £150,000 x 5.29% divided by 12, which is £661.25. You can test your own figures with our buy to let affordability calculator.

The 125% figure is one of the main reasons investors look at company structures at all. Higher rate taxpayers borrowing in a personal name are typically stressed at 145% instead, which cuts the maximum loan on the same rent. We set the two side by side in our guide to limited company versus personal name buy to let.

Personal guarantees and legal work

Lenders almost always require personal guarantees from directors, usually anyone holding 20% to 25% or more of the shares. The guarantee makes the directors personally liable if the company defaults, so the limited liability of the company does not remove personal risk on the mortgage itself. Most lenders require guarantors to take independent legal advice on the guarantee, which adds a solicitor appointment and a fee, commonly £200 to £400 per guarantor.

Conveyancing costs a little more than a personal purchase because the solicitor is acting on a company purchase, checking the company's constitution and registering charges at Companies House as well as the Land Registry.

What slows cases down

The recurring delays we see are wrong SIC codes that need changing at Companies House, deposits sitting in a personal account with no paper trail into the company, missing shareholder or director details on the application, and directors who did not book their independent legal advice until the lender chased. None of these are fatal. All of them add weeks.

Underwriters also look at the directors behind the company. Personal income still matters, both for the guarantees and because many lenders apply a minimum income floor or want to see the applicants can cover void periods. How lenders read salary, dividends and retained profit is covered in our guide to how lenders assess limited company director income.