The Client
An experienced landlord came to us with an offer accepted at £325,000 on a residential investment property. Every property they already owned was held in their own name. This one was going to be different.
A few weeks earlier they had incorporated a Special Purpose Vehicle (SPV), a limited company with property-letting SIC codes and nothing else in it. No bank balance, no accounts, no history. The plan was for the SPV to buy this property and every one after it.
The Objective
The SPV needed a Limited Company Buy-to-Let mortgage of £243,750, which is 75% of the £325,000 price. The director would find the other £81,250 personally, along with the stamp duty and legal fees.
The director’s money would go into the company as a director’s loan. The SPV would then use it to complete, and the company’s books would show the amount it owed back to the director. Rent was expected at around £1,650 a month on a standard assured shorthold tenancy.
The Situation
Nobody doubted the money was there. The director had £81,250 in savings and could show where it had come from. What we could not take for granted was whether a lender would accept a deposit that was arriving in the company by way of a loan from its own director, a few weeks after that company had been set up.
Lenders in the limited company market do not all read this the same way. One will treat a director’s loan as normal and move on. Another wants the funds sitting in the company account before the application goes in. A third asks for an accountant’s letter, a copy of the loan agreement and bank statements showing every step of the money’s journey.
Get the lender choice wrong and the problem would only surface once the underwriter opened the file.
The Challenge
Each element of this case was ordinary on its own. Put together, they narrowed the list of lenders considerably.
The borrower was a company that had existed for a matter of weeks. The £81,250 deposit was not company money in any real sense; it was the director’s, on loan. The director would have to stand behind the £243,750 mortgage with a personal guarantee. And the rent of £1,650 a month had to satisfy the lender’s rental stress test for company borrowing, which is calculated differently from a personal Buy-to-Let.
The client had already paid for a survey and instructed a solicitor. A decline at underwriting would have cost them those fees, several weeks and quite possibly the property.
What We Did
At UK Mortgage Broker we did not start by looking at rates. We started by looking at the company.
We went through the certificate of incorporation, the SIC codes, the shareholding and the director’s own bank statements to see exactly which account the £81,250 would leave and on what date. Then we rang the lenders we already knew would consider a new SPV and asked each one, in terms, whether a director’s loan of this size from this source was acceptable before a single form was filled in.
We ran the numbers at the same time. £243,750 against £325,000 is 75% LTV. We tested £1,650 a month against each shortlisted lender’s rental coverage requirement to see which of them would lend the full amount rather than trim it.
The final piece was the evidence pack. Savings statements, a short director’s loan agreement drafted with the client’s accountant, and the company bank statement showing the funds landing. All of it was in the file on day one, so nothing had to be chased once the case was with the underwriter.
The Solution
The case went to a specialist lender that lends to newly formed SPVs, treats a documented director’s loan as an acceptable deposit and applies a rental stress test the property could pass.
The structure was:
- Purchase price: £325,000
- Limited Company BTL mortgage: £243,750
- Loan-to-value: 75%
- Deposit: £81,250
- Deposit source: Director’s loan
- Expected rent: £1,650 per month
- Borrower: Newly incorporated SPV
The director transferred £81,250 plus purchase costs into the company account, recorded as a director’s loan. The SPV exchanged and completed with the £243,750 mortgage in the company’s name, backed by the director’s personal guarantee. The property now sits in the company, which is where the client wants the whole portfolio to end up.
The Outcome
Completion went through on the date the client had asked for. The underwriter raised no query about the company’s age or the origin of the deposit, because both had been answered before the case was submitted.
The client now owns a £325,000 rental property through their SPV with a £243,750 mortgage at 75% LTV, funded by an £81,250 director’s loan. That loan is recorded on the company’s balance sheet as money owed to the director, which the company can repay out of future cash flow, subject to accounting and tax advice.
None of this was complicated. It only needed doing in the right order.
Conclusion
Buying a Buy-to-Let property through a limited company involves more than finding the lowest rate. The lender is assessing the company, its directors and shareholders, where the deposit is coming from, the rental income and the property itself, and a weakness in any one of those can stop an otherwise straightforward purchase.
In this case, a newly formed SPV with no trading history or accounts was able to borrow £243,750 towards a £325,000 purchase, with the director providing the entire £81,250 deposit through a director’s loan.
Where an SPV has no cash of its own, a director’s loan can be a practical way to get the deposit into the company, provided the lender accepts it and the loan is recorded correctly in the company’s accounts.
Getting that agreed in advance is what allowed this new SPV to proceed with a 75% LTV Limited Company Buy-to-Let mortgage without the source of deposit becoming an obstacle later in the transaction.
If you are considering a limited company Buy-to-Let mortgage for a new or existing SPV, speak to us before you commit to a lender. We will check the structure, the deposit and the rental figures against criteria first.
Frequently Asked Questions
What is an SPV for Buy-to-Let?
An SPV is a limited company set up for one purpose, which in property investment means buying, owning and letting rental property.
Lenders normally expect the company to be registered with property-related SIC codes and will assess the directors and shareholders behind it as closely as they would an individual borrower.
Can a new SPV get a Buy-to-Let mortgage?
Yes, a newly incorporated SPV can potentially get a Buy-to-Let mortgage without any trading history.
Many lenders operating in this market assess the people behind the company, the property and the rental income rather than relying on a long history of company accounts. Criteria vary between lenders, so the position should be checked before applying.
Can I lend my own money to my limited company for a Buy-to-Let deposit?
Yes, some lenders will accept personal funds introduced into an SPV by a director as a director’s loan for the deposit, subject to their criteria.
The lender will want to establish where the money came from and how it moved into the company, and the loan needs to be recorded properly in the company’s accounts. In our example, the director introduced £81,250 of their own savings into the SPV to provide the 25% deposit on a £325,000 property. Independent tax and accountancy advice on the treatment of the director’s loan is strongly recommended.
How much deposit does an SPV need for a Buy-to-Let mortgage?
It depends on the lender and property, but 75% LTV is common within the Limited Company Buy-to-Let market, which means providing a 25% deposit.
On a £325,000 purchase, for example, a 25% deposit is £81,250, leaving a mortgage requirement of £243,750. Higher and lower LTV products may be available depending on the property, applicant and lender criteria.
Does the rental income affect how much an SPV can borrow?
Yes, Buy-to-Let lenders normally assess whether the property’s rental income is sufficient to support the proposed mortgage using an Interest Coverage Ratio (ICR) calculation.
The calculation and stress rate vary between lenders and products. In this case, the anticipated rent was approximately £1,650 per month, so we checked that figure against lender affordability requirements before submitting the application.
Do Limited Company Buy-to-Let lenders require personal guarantees?
Many lenders require the directors, and sometimes major shareholders, to give personal guarantees for a Limited Company Buy-to-Let mortgage.
Requirements vary by lender. A personal guarantee can make an individual personally liable for the company’s mortgage debt in specified circumstances, so borrowers should understand the terms and obtain legal advice where required.
Final Thoughts
UK Mortgage Broker is a whole-of-market broker helping clients throughout the UK and globally to secure funding on UK property. We are directly authorised and regulated by the Financial Conduct Authority.
Your property may be repossessed if you do not keep up repayments on a loan secured against it.
The Financial Conduct Authority does not regulate some forms of Buy-to-Let mortgage.
Call: +44 1628 969 500 Email: info@uk-mortgagebroker.co.uk
Related Pages
- Limited Company Buy-to-Let Mortgages – how SPV borrowing works, who lends and what to expect on rates and fees.
- Buy-to-Let Mortgages – our main guide to Buy-to-Let lending for individual and company landlords.
- Buy-to-Let Mortgage Calculator – check how much a lender is likely to advance against your expected rent.
- Remortgages – refinancing existing Buy-to-Let property, including moving personally owned property into a company.
- Mortgage Rates UK – the current rate picture for residential and Buy-to-Let borrowing.