Can I Get A Mortgage Through My Company?
More people are now deciding to apply for their buy-to-let mortgage through their company to enjoy the potential tax savings it brings. However, there are certain criteria to meet to be eligible, and it’s vital to speak to a tax adviser before applying.
What are the benefits of applying for a mortgage through my company?
Most commonly, people decide to apply for a mortgage through their limited company to save money on tax.
Generally speaking, you’ll find that you can borrow more when you apply for a mortgage through your limited company than borrowing personally. This is because limited companies aren’t subject to the stricter affordability checks on personal buy-to-let borrowing introduced in January 2017.
There are other benefits too. By getting a mortgage through a limited company, you pay corporation tax on the rental income of the property at a lower rate than income tax. However, the savings made only really affect higher rate taxpayers paying the 40% tax rate.
Many people also choose to buy property through their company to separate any personal liability.
Is getting a mortgage through my company right for me?
Speaking to a tax adviser before you decide to apply for a mortgage through your company is vital, as they’re the only people qualified to give tax advice.
You’ll need to know what the property is going to be used for before you apply for a mortgage through your company, as the property’s purpose will affect the type of tax it makes sense for you to pay.
Corporation tax is lower than income tax, standing at 20% if your profits are below £300,000, making buying through a company attractive if you’re planning on selling the property for profit without renting first.
However, if you were to buy a property as a higher rate taxing paying individual, you could be paying 20% corporation tax on the profit when you come to sell, rather than 28% capital gains that you’d pay as an individual or a sole trader.
What’s the criteria for getting a mortgage through my company?
For most mortgage applications, your company will need to be a Special Purpose Vehicle (SPV), set up specifically for the purpose of buying property. There’s no set amount of time the company must have been trading for - in theory, you could set up a SPV company tomorrow and apply for a mortgage the day after.
However, if the company isn’t a SPV - for example, you own a restaurant with no relation to property - it’s easier to get a mortgage if the company is already established. The company must have been trading for a minimum of 12 months in order to apply for a mortgage, although there are exceptions for a few professions. Your mortgage adviser will be able to tell you if this is the case.
For non SPV companies, you must have a good credit score as lenders will want to know that the company is creditworthy.
You’ll still need a deposit when applying for a mortgage through your company. The higher your deposit, the better access you’ll have to more competitive deals.
Can I get a competitive rate if I get a mortgage through my company?
Rates for buy-to-let mortgages through a limited company tend to be higher than for personal residential mortgages. However, the tax savings for higher earners can still make getting a mortgage through a limited company a better deal financially.
Will all lenders accept my mortgage application through my company?
Not all lenders allow you to apply for a mortgage through your limited company. There are currently around a third of lenders willing to lend for mortgages through limited companies, although this number is growing. It’s a good idea to use a mortgage broker to find your mortgage through your company, who will recommend the most suitable deal for your circumstances.