Buying through LTD: does my own borrowing limit matter?

[nik24nik]

Hi everyone,

I'm starting the work to purchase a second BTL flat through my Ltd company. Since the bank has previously asked me to be a guarantor on the mortgage for my Ltd, will my own borrowing limit (usually about 4.5 times the household income) be a problem, given that it's currently maxed out by the properties I currently own?

Is there a way to avoid being involved personally?

thank you!

[Lilla D]

It is the norm that you are asked to give a personal guarantee for a mortgage that is trough a Ltd company, as lenders would like to see the mortgage paid, even if the company doesn't (can't) pay it. Repossessing a property to get their money back is the last thing lenders want to do, which is why they ask you to give a personal guarantee as the director / major shareholder in the company.

However, whilst some lenders do a personal affordability check and having your own residential mortgage and other commitments might prove to be too much for some lenders, others are less bothered and would be happy to lend to you.

If you speak to a broker, they can check the suitable lenders for you and arrange a mortgage where it won't be a problem that you are "maxed out by the properties you currently own".

[nik24nik]

Thank you @lilla d for your kind reply.

I'll definitely do that.

I see landlords having several properties, sometimes tens of them, so there must be a way to break the link between personal affordability and mortgage. As you say some banks probably just look at it as a business investment, which it is, rather than a mortgage for an individual to repay.

[EvolutionBlogger]

On 1/4/2022 at 12:19 AM, nik24nik said:

Hi everyone,

I'm starting the work to purchase a second BTL flat through my Ltd company. Since the bank has previously asked me to be a guarantor on the mortgage for my Ltd, will my own borrowing limit (usually about 4.5 times the household income) be a problem, given that it's currently maxed out by the properties I currently own?

Is there a way to avoid being involved personally?

thank you!

When you invest in BTL, lenders look at the ability of your property to satisfy the mortgage interest payment. When you invest in a residential property, lenders look at the ability of your salary to satisfy mortgage payments (this is where your 4.5x becomes relevant)

So for your next BTL investment, you need to make sure that your property will earn enough rent to pay off the mortgage. Your mortgage broker will be able to find a lender that isn't too concerned about your 4.5 residential mortgage. Cautious lenders like HSBC won't like it, but many specialist BTL lender will be fine. You may want to read this article. 

With a ltd co, they will also look at how profitable the company is. If you are showing a loss on your yearly accounts, that could be an issue.