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Buy-to-Let without Personal Guarantees.


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As you may know, when buying a property in an SPV Limited Company, the directors and shareholders are frequently required to sign personal guarantees.

The personal guarantee requirement is compulsory, except in exceptional cases where the Loan to Value (LTV) is very low.

A personal guarantee is a backstop - if the asset depreciates or missed payments. The lender has the equity (minimum 15% Deposit) as a safety buffer first. After that, they will ask you to repay any losses personally.

In recent times the buy-to-let mortgage market has seen a significant switch in how landlords buy properties. An increased amount of corporation. Landlords are now, in more significant numbers, forming Limited Company's to buy and rent out properties.

The companies are typically new, perhaps a day old. Have no income or assets! So how can the company get a mortgage? Mortgage lenders ask for a Personal Guarantee.

A personal guarantee gets around the "limited liability" an LTD Company typically offers and puts you, the shareholder/director, on the line for the debt.

Most mainstream mortgage lenders require a personal guarantee. Though not all!

A personal guarantee, as above, aim to limit the lender's liability and risk. Obtaining a buy-to-let mortgage without a personal guarantee is possible If purchased at Low Loan to Value (LTV).

As a general rule, the few lenders that offer this, are looking at 50% Loan to Value (LTV).

With equity of up to 50% of the property value, the lenders feel secure that they will get their funds back in the event of a default.

The reason for such substantial equity required it to allow them to add any missed mortgage payments, fines and allow for housing price fluctuations or damage to the asset.

You ask a lender to take a risk by lending you the money but requesting not to give those same guarantees personally. As you imagine is not looked upon lightly.

You will get better mortgage rates by going with the lenders that require a personal guarantee. That is the route I'd take.

Though the corporatisation of there property portfolio, many feel like an opportunity. That they may sell there stake in the company and with no personal guarantees. Can walk away without any risk and not requiring the new owners to refinance.

TL;DR: YOU CAN GET LIMITED COMPANY BUY-TO-LET MORTGAGES IN SPV WITHOUT A PERSONAL GUARANTEE AT BUT ONLY AT 50% LTV, AND YOU PAY A PREMIUM ON THE RATE.

Source: Bespoke Finance - No PGs.

:wub: Get Mortgage Advice from my Team at Bespoke Finance on 08009202001 or email hello@bespokefinance.info 
:ph34r: 
Please don't take my messages on Property Hub as Personal Financial Advice, just a rambling guy passing time on a Coffee Break.
 

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