Buy-to-let in a limited company or your own name: what changes for the mortgage

Many landlords now ask whether a new purchase should sit in a limited company rather than in their own name. Tax is a large part of that decision and it is one for your accountant. But the structure also changes the mortgage itself, and it is much easier to plan for those changes before you buy than after.

How the lender assesses the rent

Every buy-to-let lender checks that the rent comfortably covers the interest, using a stress test. The rental cover a lender asks for can differ depending on whether the borrower is an individual or a company, and on the tax position of the individual. The same property, at the same rent, can therefore support a different loan size depending on the structure. It is worth checking both routes on your numbers rather than assuming one is better.

Who stands behind the loan

A limited company is a separate legal borrower, but lenders rarely treat it as the end of the story. Directors and shareholders are commonly asked for personal guarantees, so the loan does not simply stay inside the company if things go wrong. Read what you are being asked to sign, and be clear about what you would be liable for personally.

Products and fees

Not every product is offered to every type of borrower. Lenders may have a narrower range for companies, and some use different fee structures. Compare the total cost of each option, including arrangement fees and any early repayment charges, not just the monthly payment.

Moving existing properties

If you already own property personally, moving it into a company is a sale and a purchase in the eyes of the law. That can mean legal fees, stamp duty land tax, a possible capital gains tax charge and a new mortgage. Each of these depends on your circumstances, so take advice before you start. For many landlords, the sensible approach is to use a company for new purchases only.

Getting the paperwork right

A company needs to be set up before you apply, and many lenders prefer a special purpose vehicle that exists only to hold property. Have the company details, the shareholder and director information and your own income and asset statements ready.

Where to start

Begin with the property value, the rent and the loan you want. Cubik AI can show an indicative illustration for a buy-to-let case, and you can run it more than once with different assumptions. It is indicative only, and a broker reviews every case before anything proceeds.