Many landlords choose to invest through a Limited Company structure as it can offer them a range of benefits. However, one common question we hear is how lenders view newly set up Limited Companies, and whether a lack of trading history will impact applications.
Property investors are much more accustomed to Limited Company lending now that it’s more common within the buy to let market space. Setting up an SPV Limited Company is a relatively simple process, but how do lenders assess your application when a company has no trading history? It’s vital to understand lenders’ processes for reviewing Limited Company applications in order to secure your next mortgage.
How do buy to let lenders assess mortgage applications from new SPV Limited Companies?
When assessing Limited Company applications, lenders nearly always ask that its’ directors and/or shareholders offer an unsupported personal guarantee. This makes the directors and shareholders ultimately liable for the mortgage in the event of a repossession, and thus the lenders are actually underwriting the people rather than the company. Therefore, as when taking a mortgage in your personal name, lenders will assess the credit score against those offering the personal guarantee to ensure they meet the relevant criteria. As such, lenders are more than comfortable with the company being brand new and not having any track record.
Do I need a personal guarantee on SPV Limited Company mortgage applications?
On the whole, yes, you will need to provide a personal guarantee, regardless of whether the Limited Company has a trading history or not.
You should seek professional tax advice before investing via a Limited Company, to ensure it’s a suitable option for your financial circumstances.
What next?
If you’re looking to start your Limited Company property investment journey, then please get in touch. It’s important to fully understand what Limited Company borrowing means, especially if you want to transfer properties from your personal name into this type of structure.
For more information, contact our specialist buy to let brokers by calling us on 0345 345 6788, or by submitting an enquiry here.
