Is anyone else annoyed at this? Personal guarantees for Limited Companies?

Is anyone else annoyed at this? Personal guarantees for Limited Companies?

10:03 AM, 27th January 2023, About A year ago 9

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So, you have moved your property portfolio to a Limited Company or just set one up and want to borrow money for say a new purchase. The first thing you will notice is that interest rates for Limited Companies are higher than a BTL in your own name, apparently because there is a higher risk.

Interestingly UK Finance who monitor mortgages, among other things, show that as a percentage of mortgages, UK residential mortgages are 3 times more likely to be in arrears than BTL mortgages.

So BTL’s generally are less not more risky?

See here:

So now you are paying a higher rate for being less risky, then to top it off, they ask you for a personal guarantee.

Now that means that like a residential home owner you are personally liable for a less risky purchase.

Shouldn’t this negate the higher rate demanded by Lenders?

Happy to hear the logic behind this….


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11:55 AM, 27th January 2023, About A year ago

It's all a scam to reduce their risk and charge you more. There is no other reason.


12:00 PM, 27th January 2023, About A year ago

Money grabbing and control, another method to attack private landlords.

Brett Jones

12:06 PM, 27th January 2023, About A year ago

I think it's due to the fact that in a Limited Company, you can claim the interest as an expense.


12:10 PM, 27th January 2023, About A year ago

Yes I agree. I looked into moving 1 property with a mortgage into an LTD and out of my name and for the same reasons as you state I did not proceed. With the higher interest rates than I could get in my own name for a BTL and because of having to sign a personal gaurantee to pierce the LTD liability of incorporation I realised it was absolutely useless. These extra costs as compared to the extra personal tax of S.25 made it a complete waste of time . I calculated that it was actually a higher cost than paying the extra S.25 personal tax. Together with all the hassle and legal costs of selling property to LTD and stamp duty (yes there are ways of postponing that apparaently but then that costs money to setup). Plus the availability and range of mortgages for LTD is less than for personal BTL. You have to do accounts, pay an accountant for the year end and manage a separate set of accounts from personal BTL. It never made sense to me. At the end of it all you don't actually own the property, your company does. All the companies out there flogging LTD solutions, no thanks.


12:24 PM, 27th January 2023, About A year ago

There is less competition for Ltd company lending as fewer lenders operate in that market and many of those that do aresmall/specialist so don't have the economies of scale of the larger lenders. They will also pay a higher rate for the capital they borrow. So you can exoect higher rates in a Ltd, simple market dynamics. That said the need for a personal guarantee (and cost/hastle of getting them) really annoys me as it effectively turns it into a normal BTL but at higher rates and fees.


13:03 PM, 27th January 2023, About A year ago

The rates are driven more by market and historical business practices rather than logic. I have both personal and limited company properties and in the process of transitioning to limited company only. I recommend that the comparison has to be done on the totality of the two scenarios and not just the interest rate on a loan and the scenario comparison has to be specific to the properties and the owners and what the owners currrent and exit strategy and timing is (everyone should have an exit strategy, death and inheritance is still an exit strategy).


13:11 PM, 27th January 2023, About A year ago

Banks will lend you a brolly when the sun is shining and ask for it back as soon as it starts raining!
There ought to be sufficient equity in the property you are mortgaging to cover their exposure but they want to come for your house as well.
I recently approached Barclays for a loan to expand my property company. I only wanted to borrow £400K on an unmortgaged portfolio worth in excess of £1M. The fees they wanted to charge me were eye wateringly high, in addition they wanted a first charge on all the properties in the portfolio plus a personal guarantee from me.
Unsurprisingly I turned down their offer and they seemed genuinely upset when I declined.


14:29 PM, 27th January 2023, About A year ago

Reply to the comment left by Graeme at 27/01/2023 - 13:03
i agree with you. Each property will have to be considered differently:- consider all the variables and then calculate before buying which might be the better lending route. both now, after any refurb work, or title splitting and of course the cost of the personal mortgage compared to a commercial mortgage. calculate approx. income expected, gross and net profit and then adjust for the tax offset re mortgage INTEREST and see what the profit after tax is.
in 2022 i wanted to purchase a property that was multi dwelling on1 freehold title. i was only able to get a commercial mortgage. after a few calculations we decided to purchase in a new company. the difference on a 75% LTV was over 1% compared to a personal rate. the numbers were slightly cheaper with commercial mortgage, but we had no choice re funding in our time frame. there might be a small benefit re inheritance that i will get advice on in due course.

Graham Bowcock

10:02 AM, 30th January 2023, About A year ago

Giving PGs is fairly standard for any business, not just property companies. I have been in professional practice for years and have given PGs for some eye watering sums (shared between partners) but that's the joy of being in business.

If you're looking at incorporating then you just need to allow for the costs of PGs, along with everything else, when deciding if it's the right thing to do.

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