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Deed of Guarantee Experiences Please!


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Hello Hubbers! Hope you are all well...

I was wondering if any readers would share their experiences of Deed of Guarantee signings required for their Limited Co BTL mortgages.

I can’t find much reference to it in books or on this forum or the wider web, and professionals I’m dealing with such as Solicitors and Brokers are giving me contradictory opinions on it. Some are saying it’s unheard of and I should be able to negotiate out of them with the lenders, others act like everyone has to do it, so I’m fairly confused. 

I have a Limited company with my sister who is a small shareholder and director just for security and ease of continuation should anything happen to me. 

Our mortgages are with TMW and every time we sign up we both have to see an independent solicitor at £120 a time to sign a ‘Deed of Guarantee’, basically tying our own estates into the company finances and assets. Of course this takes all the protection out of using a Limited Co Vehicle, so aside from the tax benefits it’s a lot of hassle for not much other benefit.

So who has signed them and who hasn’t and what are your thoughts on the matter? 

Regards.

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Lenders fall into two main camps. The high street banks, most of which have a limited appetite for property investment are more likely not to request personal guarantees if they are happy with you as a client and the property. The downside to the High Street is that loans tend to be on a full repayment basis, rental calculations are much higher and they are slower. They may also ask for company security such as debentures and floating charges where there is no personal guarantee.

For the BTL limited company lenders, all insist on personal guarantees with a couple of exceptions. If the loan to value is 65% or lower and another will take 25% of the loan amount for the personal guarantee but rates are higher than the rest of the market.

Some lenders want all shareholders to sign guarantees, others just significant shareholders which is defined as over 20%-25% and they will always ask all directors. If your sister is not contributing towards the deposit monies there may be lenders who will just take a guarantee from you if she is not a director.

Regards Simon

Searchlight Finance Ltd

T:01565 654005

 

Landlord and specialist property finance advisor only dealing with investors, landlords and developers throughout the UK and beyond.

Buy to Let - Commercial Finance - Bridging Loans - Development Finance - HMO Finance - Refurbishment Loans - Multi Let - Limited Company - Student Lets - Portfolio Finance

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Thanks Simon,

That reply is really helpful.

I suppose based on what I had been told I felt as though the lenders may be taking a personal guarantee when I may have been able to use the same funding with no guarantee just by arranging the loan in a smarter way.

Based on your info my plan may well now be to save an additional 10% of the loan amount and when the fixed term has come to an end try to  remortgage on a 65% LTV with no guarantee. If I’m lucky the market rising may save the 10% up for me. I’ve never wanted to be heavily leveraged anyway so that would fit in with my portfolio LTV goals. 

Thanks again for your advice.

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  • 1 year later...

Hi

 

I just wondered if the 65% scenario worked for you?  I have just started a ltd company and have been asked to complete these deed of guarantees... if I can future plan to save these costs by reducing the ltv from 75% to 65% I will do so.  Also can you confirm if the deed is required at each remortgage or just in the initial purchase (I normally do 2 year fixed term mortgages so will I have to pay this every 2 years on each property?)  Your help would be very much appreciated 

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