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Personal guarantee for ltd co BTL


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Hi all,

Myself and a friend are setting up a ltd co in order to buy residential BTL’s. We have been told that because the ltd co is newly incorporated (and doesn’t have 2yrs accounts) we will need to personally guarantee the mortgage. 

This would normally not be a problem but both of us have young families and will likely want to move to bigger properties in a personal capacity at some point in the future. Having a personal guarantee against a BTL could affect our likelihood of getting a personal mortgage. 

Has anyone found any way to overcome this (other than pay cash for the BTL)? Does anyone have any advice? 

Thanks. Rob

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Nothing to do with the two years, you'll always be required to take out a personal guarantee - from the bank's perspective, you could just close down the company and walk away with no liability if it didn't work or prices fell, hence they want the guarantee. Haven't done a residential mortgage since, but shouldn't have any impact on it, assuming you've kept up the repayments.

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1 minute ago, dino v said:

Nothing to do with the two years, you'll always be required to take out a personal guarantee - from the bank's perspective, you could just close down the company and walk away with no liability if it didn't work or prices fell, hence they want the guarantee. Haven't done a residential mortgage since, but shouldn't have any impact on it, assuming you've kept up the repayments.

Thanks Dino.

Any idea whether this will “link” mine and my business partners credit scores? I know that if you have a mortgage with someone then your credit scores are linked. Wonder if this could cause some issues.

Thanks. Rob

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7 hours ago, rob milner said:

Thanks Dino.

Any idea whether this will “link” mine and my business partners credit scores? I know that if you have a mortgage with someone then your credit scores are linked. Wonder if this could cause some issues.

Thanks. Rob

Wouldn't have thought it would do, as long as you don't default, as you're just owners of a limited company together. They will do a credit check, so that may link them together a bit, but should only be on that purchase, not if one of you decided not to pay your credit card etc

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In the directors guarantee that you will sign you will probably be advised by your solicitor that should your Ltd default the mortgage company could chose to seek their money from EITHER or both of you. As previously stated in the other responses this is the worst case scenario and I am guessing neither of you would let it get to that situation unless you over pay, which the mortgage company probably wouldn’t let you, the market dips significantly below your deposit exposure and or you want out.

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