The UK finds itself somewhat in the middle of a mortgage crisis. Mortgages are becoming more and more expensive and people are struggling to keep up with rising mortgage interest rates and repayments. We hear a lot about residential borrowers in the news, but often buy to let owners are side-lined, perhaps due to the assumption that everyone who owns a rental property is a multi millionaire! In reality, that is far from the truth for millions of landlords who own rental properties as their only source of income and rely on them for things like pensions when they retire. Rising mortgage payments on buy to let loans are forcing landlords to increase their rent to cover the costs and some are even considering selling their assets because they can no longer afford them. The struggles that individual landlords are having has led a lot of people to predict that limited company buy to let lending could take precedent in the future, rather than sole applicant mortgages.
What Is a Limited Company Buy To Let?
A limited company but to let is where someone purchases or mortgages a buy to let property through a limited company rather than in an individual name. For example, a client could buy a buy to let on their own in their own name using their own income on the mortgage application. The same person could also set up a limited company and instead of the application listing them, they could list the company as the owner of the property. For a lot of people, purchasing through a limited company can be much more beneficial for tax reasons and can help a landlord to make more of a profit, especially in a market where income is going down for buy to let owners.
When someone has personal buy to let income, this will be added to any other income that they receive and could push them into a higher tax bracket than they previously were. So for example, if someone has a part time job and also receives rental income then they could still be classed as a low rate tax payer. But, if the landlord is forced to increase rent to cover rising mortgage costs, this extra ‘income’ could push them over into a higher tax bracket. Causing them to firstly pay more tax than they previously were and secondly to lose out on rental income due to rising mortgage payments and other associated property costs.
Someone in this scenario might set up a limited company to purchase a buy to let property so that there tax is more evenly distributed and they will still be able to make a profit, without having to pay higher tax rates and lose out on rental income. Many high street banks won’t provide limited company buy to let loans. However, with the help of a qualified mortgage advisor like Oportfolio, you can get access to the lenders that do.
Will Limited Company Buy To Let Mortgages Become More Popular?
Paragon Bank recently reported that almost 50% of mortgage brokers predict that there will be a large uptake of limited company buy to let mortgages moving forward, especially from portfolio landlords. Paragon say that out of a survey of intermediaries, 49% said that they anticipated that there would be more limited company btl enquiries. 14% actually predicted a rise in personal buy to let enquiries, a much lower figure than previous years. These predictions come purely from the perceived tax benefits of limited company buy to let applications, specifically driven by the struggles that buy to let ownership has had over the last year or so.
Speak To a Buy To Let Mortgage Broker
Whether you are thinking of purchasing a personal buy to let, a limited company buy to let, or you already own rental properties and want to re-structure your mortgages to ensure they are still profitable. Give our team of buy to let advisors a call today. We are here to help, and our initial mortgage consultations are completely free of charge.