As an experienced Mortgage Broker in Liverpool. We have worked with various Buy to Let landlords across Liverpool and helped them secure competitive Buy to Let mortgage deals.
Our customers who already have an existing property portfolio always ask whether it’s possible to transfer ownership from your name(s), into the name of your limited company.
Firstly, it is essential to know how a mortgage lender will approach purchases from Limited Companies. There are not many lenders that will accept Ltd Company applications through anything other than an SPV (Special Purpose Vehicle) Company.
An example of this is a company set up expressly to invest in properties like this. When registering your company, your registration will include a SIC (Standard Industrial Classification) Code. You need to be aware of how mortgage lenders approach limited company purchases.
There aren’t many mortgage lenders that accept limited company applications through anything other than an SPV (Special Purpose Vehicle) Company, i.e. a company set up expressly to invest in this type of property.
When you register a company, your registration includes a SIC (Standard Industrial Classification) Code that sets out the business type(s) in which the company will participate. The mortgage lender doesn’t usually accept applications from general trading companies that can trade in other areas.
The SIC codes typically accepted are 68100, 68201, 68209, 68320 but it can vary from lender to lender. To find out more information about SIC Codes, consult the Government website.
Purchasing a Buy to Let property under a limited company comes with both advantages and disadvantages. So for instance, not every mortgage lender will consider applications from an SPV. Preferring to limit their lending to individuals/couples in their name(s).
Therefore, individuals tend to have a wider choice of lenders and products than SPVs. Of those lenders that will lend to an SPV. The mortgage rates offered would typically be higher than those provided to individuals.
On the plus side, in recent years, changes to the way rental income gets taxed have meant that. For many people, the tax advantages generated by SPV make up for any extra interest charges or lack of choice.
The first thing our Buy to Let Mortgage Advisors in Liverpool recommending you is when considering whether to buy your property portfolio under the auspices of an SPV is that you get advice from a specialist tax advisor.
They will evaluate how factors, such as your other income sources, and the rate of personal income tax you pay will affect your overall tax status and establish whether individual or SPV ownership is better for you.
As we mentioned before, the main factor in deciding whether to buy under an SPV is your tax position. It is complicated further when determining whether to transfer properties you already own as an individual into company ownership.
There is a slight problem, though, this sort of transaction is not a simple transfer; it’s a change of legal ownership.
The limited company is a separate corporate identity, so the transaction is essentially a purchase by the SPV from you selling as an individual, so you’ll have to account for stamp duty charges, legal costs, and new mortgage valuation charges.
Additionally, you will need to remember that limited companies have running expenses and legal obligations. However, these may get offset by the potential upside of some tax-deductible costs or long-term tax benefits.
Where Landlords are looking to increase their property portfolio, it often works out that they continue to hold existing properties in their sole name(s) but purchase any new additions under the company name, thus avoiding all the on-costs of switching.
Having said that, no case is the same, and there may be some circumstances where the switch would be beneficial in the long run, even considering the costs of switching.
Contact us if you are thinking of going down this route, our team of Specialist Mortgage Advisors in Liverpool is here to help you with all of the arrangements, providing you with top quality service.