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How do Trading Limited Company buy to let mortgage applications differ from Limited Company applications? We examine the benefits and drawbacks of buy to let property investment through your Trading Limited Company to help you make informed investment decisions.

Limited Company mortgage applications are now as common as investing through your personal name. As such, many property investors are familiar with the application process that comes with this investment structure. However, many lenders view Trading Limited Companies as a more complex investment structure.

Consequently, investing with your Trading Limited Company can mean a longer mortgage application process. However, there are also many benefits to consider that could help boost your property investment journey.


Why invest in buy to let through a Trading Limited Company?

One main benefit to investing in buy to let via a Trading Limited Company is being able to use any available cash funds from the company to invest in the property. Often, drawing these funds down into your personal account incurs a tax bill, so this method may benefit landlords looking to optimise their investments. Please seek professional tax advice more making any property investment decisions.


Layered Limited Company Structures

Many of our clients choose to invest via a layered company structure. This is where a Trading Limited Company owns an SPV Limited Company, through which they purchase their investment property. This is a much more attractive investment structure for landlords looking to facilitate cash flow through their Limited Companies more efficiently.

On the other hand, using a layered structure adds a degree of complication; you’ve got to set up another Limited Company, which you’ll need to keep up to date accounts for. For many of our clients, this is additional admin they’d rather avoid. We tend to find that clients looking to invest in one or two buy to let properties using company cash savings are happy to just apply through the Trading Limited Company. For those wanting to build a substantial investment property portfolio, using other investment structures is typically more cost-effective.

Read our helpful blog for more information on Layered Limited Companies, or speak to a broker to discuss which option may be best for you.   


Drawbacks of investing in buy to let property via a Trading Limited Company

One of the main drawbacks of investing via a Trading Limited Company is that you have limited options when choosing a lender, with just 11 buy to let lenders currently offering to them. As such, the available mortgage rates are less competitive than those for SPV Limited Company or Individual applications.

Due to the risk, a lot of buy to let mortgage lenders don’t accept Trading Limited Company applications. Unlike SPVs, where the only activity is purchasing and selling property, Trading Limited Companies have many more factors that can impact finances. Not only is this more complex to underwrite, but it increases the risk of financial difficulty and, therefore, mortgage defaults.

To mitigate this risk, all lenders offering to Trading Limited Companies require personal guarantees, and some need a fixed and floating charge debenture over the company itself. Understandably, many business owners would rather avoid debentures and opt not to invest directly through their Trading Limited Company.

The best way to decide how to invest in buy to let property is to speak to a professional tax advisor. We can provide mortgage illustrations for you to compare investment structures, but a qualified tax specialist will be able to determine the most tax-efficient method for you in the long run. Please speak to a professional tax advisor before making any property investment decisions.

Next steps

If you have any questions about Trading Limited Company mortgages, do not hesitate to give our team a call on 0345 345 6788 or submit an enquiry here.

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