More lenders offering limited company buy-to-let mortgages

Pepper Money recently overhauled its entire product range with a number of enhancements and new products, including the launch of limited company buy-to-let rates.

The lender has launched a range of two and five-year buy-to-let fixed mortgages for limited companies and they now have free valuations for purchases and remortgages. The range comes with a rental calculation of 125% at the pay rate on five-year fixed rates and the higher of the initial rate +2% or 5.50% on two-year fixed rates.

Hinckley & Rugby Building Society is offering three buy-to-let mortgages for limited companies up to 70% loan-to-value and they have been designed for properties held within special purpose vehicle limited companies with up to four shareholders. Each mortgage has an application fee of £250 while the completion fees are £1,250 for the two-year mortgages and £999 for the five-year fix.  

Mansfield Building Society has also launched a limited company buy-to-let proposition, including product options with and without personal guarantees. The society is focusing on non-trading limited companies that exist solely for buying, selling and letting residential property with up to four UK-based directors or shareholders.

Paragon accepts applications from companies registered and trading in England, Wales or Scotland, providing its directors are resident in the UK and liable to tax in the UK for a minimum of the last two years.

The company must have been incorporated for the principal activity of buying and holding residential investment property and this must continue to be it’s the main activity and additional security in the form of a Floating Charge may be required.

At least 80% of the applicant company shares should be owned by the directors and guarantors in their personal names.

If you are considering setting up a limited company to purchase a property or remortgage your property portfolio it is important to speak to an accountant to work out how your tax situation will be affected.

Many landlords are expecting larger tax bills over the coming years and a limited company mortgage may not always be suitable.  

According to Paragon the benefits of a limited company mortgage include: 

• Mortgage interest is considered an expense and can be fully offset against rental income received
• Profits within the company are liable to corporation tax rather than personal tax
• Dividend allowance and directors’ loans can make withdrawing profit more tax-efficient
• Profits can be re-invested to expand portfolio without additional tax
• Options for inheritance tax planning between parents and children

Kensington Mortgages is offering a 2.59% two-year fixed-rate mortgage for limited companies with a £1,999 arrangement fee up to 75% loan-to-value.

After the fixed-rate, the rate automatically reverts to LIBOR plus 4.15% if landlords do not remortgage to another lender or arrange a product transfer.

The minimum loan size is £75,000 and the maximum loan size is £500,000.

Kensington's "special" five-year fixed is 3.74% and there is also a £1,999 arrangement fee. After the fixed-rate, the mortgage reverts to 2.44% over LIBOR.