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Will Taking My Sole-Trader Business Limited Stop Me From Getting Personal Buy to Let Mortgages?


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Hi everyone, 

 

Due to an increasing self-employed profit and owning three personal buy to lets already, I'm considering taking my self-employed business limited this summer in order to keep my business earnings separate in the ltd company, and to keep my personally owned property income taxed at just 20%.

However, I'm also planning on buying another 4th buy to let next winter, maybe February 2022. Would I be able to get a personal buy to let mortgage just 6 months after taking my business limited, stopping being a sole-trade and becoming a director paid a small wage and dividends instead?

I'm not sure how I would prove that I have 25k of income as the ltd wouldn't have been set up for a year let alone 3 years, I technically wouldn't be self employed anymore and I wouldn't of owned my other buy to lets for 3 years either.

Are there mortgage companies out there who don't require proof of personal income? Do these charge an increase rate for the privilege?

If not, maybe I could I just pay myself a 25k annually equivalent wage from the ltd company for three months previous to the mortgage application, giving those three payslips as evidence of earnings before dropping that pay in subsequent months? Or use my partner (an nhs worker) to guarantee the mortgage with her income above 25k?

Another point is that I'll be moving into my partners house this year and renting my own home out (this it what will be my 3rd buy to let). I therefore won't own my own personal home, as I'll live with her and just pay some form of rent, again will lenders care about this? I know they ask for you to own your own home, but in my case I'll just own other properties instead.

I've come up with a plan for myself but now I'm a little worried that my plan won't work due to technicalities and requirements of the mortgage companies!! 🤐

-Will taking my sole-trader business limited stop me from getting personal buy to let mortgages (as no proof of income)?

-Will not owning my own home (renting instead) stop me from getting further mortgages?

Any advice or past experiences much welcomed!

Thanks, Joe

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Hi Joe

Firstly, if you have 3x BTL's already, when you buy the 4th you have moved into the territory of what is known as a 'portfolio landlord' which means lenders will assess the applications differently. This article covers a bit more detail on this https://www.telegraph.co.uk/property/landlord-guide/new-requirements-for-portfolio-landlords/

This means a lot of the cheap BTL products from typical banks/lenders will not be available and you will have to apply for portfolio BTL products which tend to be slightly higher on rates. On a positive, there is less emphasis on your personal income position and the lenders are mostly looking at the ability of your BTL property to service itself and the loan repayments comfortably (whilst also factoring in the numbers across the whole portfolio to ensure it is profitable)

Most of the lenders we deal with would ask for tax returns for proof of income if you are self employed and if your business is simply altering structure to a LTD co but is essentially the same business, most lenders should be able to get their head around this.

Minimum income criteria can vary across lenders and there are some who do not have a minimum requirement as long as your tax return shows you are earning something and you can afford any personal commitments. If you have <£25k income on your tax return this will exclude some lenders. . 

Regards the home ownership, again its a requirement of some lenders and others are not bothered. Again this will reduce down lender options. 

When you are ready to buy this is where I would suggest speaking with a broker who will be able to find you the best funding solution.

Hope that helps 

Property investor ¦ Commercial Finance Broker ¦ Ex banker with 20 years lending experience. 

Commercial Lending Manager at Real Finance Ltd - www.realfinance.co.uk
Happy to discuss any queries regarding property finance for  Company/Complex BTL, HMO, MUB, Holiday Let, Commercial, Bridging & Development.  

kirsty@realfinance.co.uk
07494949852

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