Finance for limited company to BTL in Scotland

by Readers Question

10:01 AM, 30th December 2015
About 3 years ago

Finance for limited company to BTL in Scotland

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Finance for limited company to BTL in Scotland

Does anyone have the inside track on why lenders seem to have been so slow to come up with more BTL mortgage products for limited companies, following the new tax measures announced in the Budget and Autumn Statement?lenders

I have been looking into options for buying a property in Scotland and have been advised that currently there is just ONE lender prepared to do this kind of deal at 70% LTV, and the rate at 4.74% is almost double the rate on equivalent personal mortgage products!

It seems to me that landlords (those with a portfolio held in their personal name, rather than in a company) are between a rock and a hard place, with the tax changes pointing clearly to the corporate model as the way forward, yet lenders not coming up with anything sensible to meet the new demand.

Any constructive suggestions on the way forward?

A Landlord



Comments

Neil Patterson

10:08 AM, 30th December 2015
About 3 years ago

Mortgage lenders are purely commercial animals and only offer products based on profit margin.

Hence they normally price a product based on margin/profit over a 5 year term. These margins are actually quite low and hence they want proof that demand is strong enough to out weigh the set up and admin costs.

As the new tax rules will take a couple of years to bite I can guess they are just waiting to see what happens and diverting scarce capital to other more quantifiable markets.

If the demand is there in sufficient quantities the gap will eventually be filled.

Howard Reuben CeMap CeRER

10:51 AM, 30th December 2015
About 3 years ago

It has always been viewed as a more 'corporate' and higher-end strategy to own and manage assets in a company structure and, as Neil says, the banks have considered this type of ownership strategy to be a commercial platform rather than the more personal / individually owned property 'BTL' arrangement instead.

But, due to the new tax and stamp duty implications as they stand today (anything is subject to change and of course the new tax regime doesn't start until 2017- and only then as a gradual implementation for the next few years - and the SD surcharge doesn't commence until April) so the BTL mortgage market is indeed getting ready for a huge influx of mortgage applications from Limited Company borrowers.

A while ago. the loans would only have been offered by a handful of commercial banks and usually on a 5 year capital repayment basis only.

Now, the market is growing.

We have access to approximately 13 lenders who will provide BTL mortgages to Ltd Companies and we do indeed have more than one who lends in Scotland!

The bottom line decision is of course down to which route (Ltd Coy or personal name) provides you specifically with the best profit option.

Only a clued up property tax expert can confirm this for you and your personal circumstances.

When you have had that conversation and seen the tax calculations, you can then properly compare the advantages and disadvantages of corporate BTL taking in to consideration the (sometimes, but not always) higher interest rate charges, versus the personal name (possibly higher tax charge) but lower interest rate products.

Whichever is best for you, I recommend that your next step is to work with an experienced BTL broker who understands the intricacies of this market. My (growing) team of Advisers has a huge access to market and can help with BTL's for limited companies or individuals.

Ultimately, without sounding too defeatist about the legislative situation, it is what it is (and always has been and always will be) and so the best any of us can do is to look at your options as a snapshot of today and select the best way forward.

Hope that helps.
Howard Reuben recently posted...H D Consultants | Mortgage & Protection Broker | Buy To Let | Colchester Essex

BTL INVESTOR SCOTLAND

11:48 AM, 30th December 2015
About 3 years ago

Bank of Scotland, Shawbrook, Aldermore - could be others.

Howard Reuben CeMap CeRER

12:10 PM, 30th December 2015
About 3 years ago

With the recent influx of new specialist lenders that we have access to, I can confirm that there are indeed others that are available. Not all Brokers have access to all lenders though and of course some lenders are only accessible via Brokers as they don't deal direct.

Mr Steinberg

13:36 PM, 30th December 2015
About 3 years ago

Reply to the comment left by "BTL INVESTOR SCOTLAND" at "30/12/2015 - 11:48":

Shawbrook ltd company rate at 70% ltv is currently 4.74%, compared to (just one example) Virgin Money personal btl mortgage 2.29% discounted for two years... ltd company model just doesn't stack up at high ltv when there is such a big disparity in the rates.


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