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gavin marshall

BTL Lenders Open to Change to LTD Company

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Hi Folks,

 

I thought it would be useful to compare notes\ sucess stories on peoples experiences here regarding getting permision to move their existing properties through a traditional individual BTL mortgage to a LTD company.

 

I for one have the following lenders:-

 

Lenders

Santander (Abbey) x3

Paragon x2

Accord

Post Office (Bank of Ireland)

 

Approach

I have approached them all by phone and asked if they would permit me changing the name on the mortgage to a company I would be director of. Also I would personally guarantee the mortgage.

 

Results

So Far I have called Santander and Accord, Both have said they do not lend to companies. They would not allow me to move the properties to a company structure under the existing mortgages or to move products with them (in the hope they would waive exit fees).

 

So I am personally stuck so far as I have new 5yr fixed rate deals for all but 2 of my properties. What I hope our collective can come up with is maybe improving the approach to the above - has anyone had sucess with the above lenders by phrasing differently or giving different info to me above?

Has anyone had a sucessful experience with a particular lender?

 

It looks like im trapped as ERC's of 5k+ per property to leave and more expensive LTD lending products are set to be more expensive than the tax benefits doing this brings. However I could overpay them to gradually bring them down (Santander for example let-slip that their interest only mortgages we can overpay by 20% per year penalty free!)

 

Looking forward to hearing of all your collective (hopefully better than my) experiences...

 

Cheers

Gav

 

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To evaluate the worth of switching to Ltd Co, you would need to understand the increased tax you would pay, if you left the properties in your own name. Without knowing the extra tax you will incur, you cannot evaluate whether the costs of switching to Ltd Co mortgages are worth the hassle. Your accountant should be able to calculate this for you.

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Hey Gavin,

 

I got the same response when I asked the same question of Virgin - they don't lend to companies and as a limited company is a separate entity there is no way to transfer the mortgage.

I'm now in the process of re-mortgaging to Shawbrook products (and they ain't cheap! ).

 

I have spent hours in excel calculating the trade off of ERC, SDLT, CGT and the personal income tax.

For me personally, transferring three properties before the 1st April is more effective than waiting, even with a 2.5% ERC (I've managed to reduce this by overpaying each of the mortgages in the short term, Virgin allows 10% per calendar year).

In each case the ERC is less than the SDLT so I make a saving with each transferring (not taking into account the fees associated with the move, as this would happen no matter when I moved them across).

 

Unfortunately I don't think there is any magic bullet. It's simply the new costs of running a property business.

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Kevin and Kylie are absolutely right; there's no catch-all solution, as the costs of moving to a limited company for some will outweigh the benefits, while for others this option will be the most advantageous.

 

Paragon will lend to limited companies, but their criteria states that they must be the "sole and exclusive secured lender" for properties held within the company. Bear this in mind if you seek to transfer the properties you have mortgaged with them, as doing so may limit your options with regards to your other properties.

 

What I hope our collective can come up with is maybe improving the approach to the above - has anyone had success with the above lenders by phrasing differently or giving different info to me above?

 

A lender's criteria are their criteria. Circumventing the criteria by omitting details or giving different information sounds a lot like mortgage fraud to me, and is not something I would recommend. If your lender later found out the full story, they would be within their rights to take action.

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Thanks so far.

 

Certainly the last thing I'd want to do is commit mortgage fraud!

 

Where I'm coming from is the accountant I have found says just contact my existing lenders and ask to change the name to a company (I have been doing my own accounts and tax planning up until now).

I was sceptical it would be that easy, and I think there is a reason why mortgages for limited companies are more expensive.

 

I guess I was hoping there might be some sucess stories out there of certain lenders (Like Paragon above Is encouraging) that would allow it.

 

I think the BTL as an indiv mortgage lenders are going to have to change their tune very quickly if they want to keep their business, As I for one won't be applying for any new BTL's as an indiv from now on.

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I guess you could always  do as your accountant suggests and say to your lender you were thinking about asking to change to a Ltd Co and if you did what would be their response Gavin. When they tell you they would not allow it you can report that back to your accountant and ask what he would suggest then.

Or maybe find an accountant they know a bit more about property specifically.

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There is one lender doing this already but they also offer limited company mortgages now. To incorporate should only be done for the right reasons so don't rush into it. Talk to a tax accountant first as increasing the rent may sort the issue out in some circumstances.

 

More BTL lenders are looking at offering limited company mortgages and more of these will come out later this year. We had several years to consider this but the SDLT change has pressed the panic button.

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Hi All

I know this is not exactly the thread for it but I'm now trying to find a lender for my first investment through a limited company. I have three in personal name so have the necessary 'experience ' if you can call it that. So far I've only spoken to metro bank. While they are willing and have a product for it, here's what I found a bit restrictive -

- minimum lending £250k ( I am waiting for them to confirm if this can be negotiated)

- stress test of 125% rent ( of interest only) at 5.5% rate.

While first is something that just means I need To target a bigger property and more deposit, second is a bigger constraint. On one hand it ensures that if the property qualifies, it's a great yield. In effect you are targeting the rent to be 125% of a higher monthly interest only payment when for the time being you might be paying it at 3.5 or near about. And that's what makes finding such a property difficult.

Anyone has any other lenders with better terms to share or even any experience with Metro bank on this product ?

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I have had a few go's at it and am currently applying through N&P for a 100k interest only mortgage - seems ok so far but lots of hoops and restrictions so will see if it works out. Shawbrook are more open to lending but charges and interests rates were too high for my liking. lloyds are decent but do repayment only..

I will see if I actually get a sucessfull result and then come back

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Have a look at Paragon, they have now removed their restriction of having to be the only lender to a LTD company.

Their rates seem to be the most promising at the moment. Their affordability in terms of rental is calculated at 125% x 5%

 

As an aside, I ended up failing with Shawbrook earlier this year (due to their extreme slowness and solicitors incompetence) and missed the SDLT cut-off. Re-doing the figures to move the properties into a LTD with those additional costs has proven to be less attractive than keeping them owned individual.  :(

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I seem to have got through all the pre-reqs and tests with N&P and now have the official offer so its down to the solicitors to get the deal over the line.. I am hoping that having done one refinance, the subsequent ones will be easier as my mode is to buy at auction fro cash and then refinance after refurb and tenant in place and 12 months. Though I may try 9 months for the next one and see.

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Great post Gavin and great info and advice on the thread thanks.I have come to the conclusion I won't be transferring my properties to a ltd company even though I have a number which are mortgage free, however I do want to buy subsequent properties via a limited company. Do a number of limited company lenders allow you refinance before the six month rule - also can anybody tell me what the minimum mortgage is for a limited company as my property purchases are usually less than £100k?

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Lenders that lend to a Ltd Co Mark, generally have no restriction as to how long you have owned the property. Getting mortgages for properties owned by your Ltd Co, gets a lot more challenging if they are valued below £75k. Purchasing below £75k is not a problem if you can refurb and get them subsequently valued above £75k.

Great to read you have some unencumbered properties, they can give you very powerful leverage for acquiring new ones. Good idea to keep them that way.

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