Limited Options for Corporate Buy to Let Loans

Limited Options for Corporate Buy to Let Loans

16:28 PM, 23rd August 2011, About 12 years ago 3

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"The Mortgage Works leaving the market has left it short"

As the largest buy to let lender pulls out of the corporate buy to let market, landlords with companies now have limited options for borrowing.

The Mortgage Works – the specialist buy to let lending arm of The Nationwide – was one of a declining number of lenders willing to take on lending to property investment companies.

But the lender has now withdrawn from the market.

Paragon Mortgages, another specialist buy to let lender for professional landlords, is still willing to finance buy to lets, houses in multiple occupation (HMOs) and blocks of flats for companies.

The options left for borrowing are now restricted for landlords seeking to hold investment property in a company.

Specialist commercial lenders will accept applications for portfolio financing of buy to let property, but often the minimum figure is at least £1 million – and completing a deal is rare as banks strive to divorce themselves from risks associated with the transaction.

As the risk is perceived to be high and the number of lenders in the market is low, many are taking advantage by cherry-picking deals with low loan-to-values of 60% or less, while charging high interest rates and arrangement fees.

The alternative is buying rental property as an individual rather than a company.

Plenty of lenders are offering competitive buy to let mortgage deals, but most of the cash is going to remortgages rather than purchases.

If you are a corporate buy to let borrower, sit tight with your mortgages because The Mortgage Works may have stopped advancing cash, but the lender will continue to service existing loans.

For investors looking to buy, complete the deal by borrowing in your own name. This may be harder than it seems if you already have buy to let property as lenders will have aggregate loan and property value restrictions to reduce their risk.

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3:29 AM, 26th August 2011, About 12 years ago

Hi Mark,

Any chance of expanding on tax implications corporate vs private?

Thanks Mike...

22:38 PM, 26th August 2011, About 12 years ago

Corporate - After expenses income is first taxed at corporation tax rate (21% or 27%), the remainder can then be taken as dividend and treated as private below (for the first 44K taken there is no further tax deduction you receive a tax credit from the corporation tax deduction made above).

Private - After expenses all income is regarded as personal income and taxed according to peronal income tax bands similar to the following:

band 0 up to 6.5K taxed at 0%
band 1 up to 44K taxed at 20%
band 2 up to ??K taxed at 40%
band 3 above ??K taxed at 50%.

Capital (profit from sales of houses)
Corporate - Capital profits are treated the same as revenue profits.
Private - pay capital gains tax at ??%

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