Floating Charge on LTD company mortgage

by Readers Question

10 months ago

Floating Charge on LTD company mortgage

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Floating Charge on LTD company mortgage

This is more a ‘watch out for’ rather than a question, having said that if anyone has a fix I would truly appreciate it!

In brief, I set out to purchase two buy to lets within a limited company that currently has one buy to let with a Kent Reliance mortgage. We decided on Paragon mortgages for both new properties. They have a floating charge clause which means they have a charge against all company assets. My trusted financial advisor spoke to Kent Reliance and they said its fine, they get them all the time, there should be no problem in allowing the floating charge. (Verbally) We are now ready to exchange on both properties having spent three months in the conveyancing process etc. Kent Reliance has now been formally approached to allow the floating charge, and they have refused it.

Yes we are pushing back, but it seems unlikely we will overturn the decision. Clearly I am in talks with my F.A. about how we have ended up in this position having spent thousands in solicitor’s fees and mortgage application fees. In hindsight, I would have held off starting the conveyancing process until my solicitor had checked the mortgage offer, but in reality no seller would have taken me seriously. One to be aware of in this new world of Ltd Company buy to let.

Trevor



Comments

Harlequin Garden

10 months ago

I'm surprised you were ok with this - I am at this stage this week (Monday in fact) and 2 new ones with Paragon to be bought within a company totally separate to any other properties because of this and my FA always said that each property would need to be on its own because of the need by another lender to have a charge over any other asset in the company. I'd have a stern word with your FA - and wonder why you would want to have a charge over another unrelated property. I suppose I'll end up with a number of Ltd companies if I continue with this as lenders will have a max on the properties they will lend on - I did suggest putting properties in the company that had no lending but he advised against this as well as the lender would have a charge over those too - one company one pot.

Trevor Cooper

10 months ago

I am not OK with it. I have considered the option of setting up a new LTD co but just don’t want the additional work and expense of managing the accounts each year. There are various interesting conversation going on now between all parties, and I will write an update when we have the final outcome. Thanks for commenting...

Harlequin Garden

10 months ago

I'm likely in the same position so will be interested and pleased to hear. I just happen to be in the position of two coming up at the same time and best rates with the same lender - Paragon, as others come up for refinancing if I can go with Paragon then it would work for those too - who knows what is ahead for us.

Harlequin Garden

10 months ago

Reply to the comment left by Trevor Cooper at 11/10/2017 - 11:08
I've just had a rethink with my FA and he's actually come back with Kent Reliance doing a single charge over a single asset - I'll get him to check, he's generally (always) correct but I've no doubt yours is as well, so will report back to you KR appear to be giving out conflicting advise.

Trevor Cooper

10 months ago

Reply to the comment left by Harlequin Garden at 11/10/2017 - 13:04
Ok great, thank you it would be good to hear if Kent Reliabce have agreed a floating Charge from Paragon.

Ross McColl

10 months ago

My brother has just taken out 2 mortgages with Paragon in a Ltd Company. It only holds Paragon properties and unencumbered at present. I had the same concerns when he took them out, but this has confirmed what I already thought.

Pamela Potter

10 months ago

Good to know. I have just bought three properties in a LTD company but all mortgages with Aldermore. There was a floating charge but it all went smoothly. I realise now from reading this thread that, should I choose a different mortgage provider next time, the story may be different. Went direct to Aldermore too so no FA to blame if mine went wrong.

Am planning to shift my personally owned properties (18 in total), over time into LTD companies and may choose, as mentioned above, to set up a new company for each mortgage provider to combat the floating charge complication. Although it does sound like a complete ball ache to be honest.

Trevor Cooper

10 months ago

Reply to the comment left by Pamela Potter at 18/10/2017 - 11:13
Yes indeed! Still, I suppose if it were easy, everyone would be doing it.
Ironically I am now taking a new loan on one of the properties with Kent Reliance so we will just have the one lender. I really don't want to manage multiple Ltd Companies if I can help it...

Charlotte Emery

7 months ago

Interested if you got anywhere with this as I am in exactly the same boat now !! Am having a remortgage refused as Kent will not agreed to Floating charge. Its been very frustrating and a steep learning curve. Paragon have now removed the floating charge requirement which is great news for landlords with Kent Reliance mortgages,. however our property doesn't meet the minimum property valuation requirements of Paragon so we can not use them. Anyone found other lenders who do not have the "floating charge" requirement ?


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