HMO Mortgage

Step-by-Step Guide to buying through a limited company

Step 1 - Are you sure?

There are costs in moving a property from personal to a limited company. The first step is to ensure you know the advantages and disadvantages. Proceeding with the best course from the outset.

Changing your mind later and moving property can result in Capital Gains Tax and Stamp Duty (SDLT). It's also not a one or the other choice. If you are a portfolio landlord you can have some in personal name and some in limited company.

Step 2 - Incorporate a company.

You can Incorporate a limited company, a brand new one. Online, via your Mortgage Adviser or Accountant.

Mortgage lenders do not like lending to existing companies (doing other activities). You would not use the existing company but set up a new company. A Special Purpose Vehicle (SPV) used for Buy-to-Let only.

You first need a suitable company name, that is not used by any other company. It can not suggest any other business activity. "Bobs IT Consultancy Limited" won't work. Trademark names such as "Burger King Homes Limited" won't be acceptable.

You can Search the Register ( https://beta.companieshouse.gov.uk/ ) to see if a name is available.

On registration, you need to know the


When you create the company, it will ask for your SIC Code.  This identifies what company activity you will be doing. The SIC Codes you want are:

You only want these activities, you don't want any more. Don't use others that contradict the company activity. Mortgage lenders won't like it if you also include Plumbing, etc.

You can use the standard memorandum and articles of association. No special changes needed to the provided articles.

Step 3 - Set up a Business Bank Account


Company formation can take up to 48 hours. Once you have your company number, you can set up a bank account.

Your income and expenditure will go through this bank account. Such as mortgage payments and rental income. You can not use your personal bank account for the mortgage payments.

You can ask your prefered bank - HSBC, Barclays, Santander or whomever. An appointment may take a while and you need the bank account to get the mortgage offered.

If your bank is too slow. You can consider the online banks such as Starling Bank or Monzo Bank for easy and quick set-up.

Step 4 - Limited Company Buy to Let Mortgage


You need to tell your mortgage adviser from the outset. That you want a limited company buy-to-let mortgage. This is because not all buy-to-let lenders offer limited company mortgages.

The lenders that do offer the facility, often have the same products for a company or personal. Though not all and may result in higher rates or fess than in personal name.

The process is similar. You will receive a Key Facts Illustration (KFI) outlining the costs. On confirmation, your mortgage broker will proceed to an Agreement in Principle (AIP). Then onto a full mortgage offer and finally completion.

Step 5 - Conveyancing


Your small residential conveyancers may not have experience in Limited Company Buy-to-Let. It requires extra work with Companies House, Personal Guarantees and so forth.

Mortgage Lenders, due to the specialist work, have a panel of prefered conveyancers. Ask your mortgage broker if the conveyancer is on the Lenders panel or ask for a recommendation.

Considering the extra work, conveyancers may charge on average an extra £200 for works.

Your mortgage lender will want you to sign a "Personal Guarantee". One condition is you receive solicitors advice on the Personal Guarantee. The issue is it can not be the same solicitor your company is using.

Ask your mortgage adviser or conveyancer recommendations for a Personal Guarantee Solicitor.  Prices range from £150 to £500.

Step 6 - Deposit


Before mortgage completion, you will need to send deposit money to your Conveyancer. You should talk to your accountant if that should be a "Gift" from you to the company or a "Loan". Each has different tax implications.

As with any mortgage, money laundering will need you to evidence the source of funds. Such as savings, inheritance or sale of another property.

Is your deposit coming from another company you own? talk to your broker about the lender's requirements. You may be able to loan it from one company to another, though most will need it to be a dividend to you. Then gifted or loaned from to the company.

Step 7 - Insurance


Before mortgage completion, you will have to have buildings insurance in place. This is a mortgage offer rule. The insurance needs to be in the company name, not your personal name.

Your mortgage adviser can help you get quotes. The insurer listing the company as a party to the insurance does not add costs.

Step 8 - Completion


Congratulations! Remember the company is a "separate legal entity". Your money is not its, and its money is not yours. You should pay all costs and receive income into the company bank account for simplicity. This will help you when filing accounts.

Your company may not have any money from the outset, to pay insurance, mortgage fees or renovation. You can gift or loan it from your personal funds to the company.

Try and keep it as simple as possible. Your accountant will thank you for separating personal and company finances.

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