Buy to Let Limited Company Mortgage Rates Calculator
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Complete Guide to Buy to Let Limited Company Mortgage Rates
Investing in property through a limited company has become increasingly popular among UK landlords, particularly since the introduction of tax changes that reduced mortgage interest relief for individual landlords. This comprehensive guide explains everything you need to know about buy to let limited company mortgage rates, how they work, and how to calculate your potential returns.
Why Use a Limited Company for Buy to Let?
There are several key advantages to holding buy to let properties through a limited company:
- Tax efficiency: Companies pay corporation tax on profits (currently 19-25%) rather than income tax (up to 45%)
- Mortgage interest relief: Limited companies can deduct 100% of mortgage interest from rental income before calculating taxable profit
- Inheritance tax planning: Easier to transfer shares in a company than property ownership
- Limited liability: Your personal assets are protected if the company faces financial difficulties
- Profit extraction flexibility: You can choose when to take profits as dividends or salary
How Limited Company Buy to Let Mortgages Differ
Mortgages for limited companies have some key differences from personal buy to let mortgages:
| Feature | Personal BTL Mortgage | Limited Company BTL Mortgage |
|---|---|---|
| Interest rates | Typically 0.2-0.5% lower | Slightly higher (0.5-1% premium) |
| Arrangement fees | 1-2% of loan | 1.5-3% of loan |
| Loan to Value (LTV) | Up to 80% | Typically 70-75% maximum |
| Affordability calculation | Based on personal income | Based on company rental coverage |
| Minimum rental income | 125-145% of mortgage payment | 125-150% of mortgage payment |
| Tax treatment | 20% tax credit on interest | Full interest deduction |
Current Market Rates for Limited Company BTL Mortgages (2024)
The buy to let mortgage market for limited companies has become increasingly competitive. As of Q2 2024, we’re seeing the following typical rate ranges:
| Loan to Value | 2-Year Fixed Rate | 5-Year Fixed Rate | Tracker Rate |
|---|---|---|---|
| 60% LTV | 4.8% – 5.3% | 4.5% – 5.0% | 5.2% – 5.7% |
| 65% LTV | 5.0% – 5.5% | 4.7% – 5.2% | 5.4% – 5.9% |
| 70% LTV | 5.2% – 5.8% | 4.9% – 5.5% | 5.6% – 6.1% |
| 75% LTV | 5.5% – 6.2% | 5.2% – 5.9% | 5.9% – 6.4% |
Note: These rates are indicative and can vary significantly between lenders. Always consult with a specialist buy to let mortgage broker for the most current offers.
How Lenders Calculate Affordability for Limited Companies
Unlike personal buy to let mortgages where lenders consider your personal income, limited company mortgages are assessed based on:
- Rental coverage: Most lenders require rental income to cover 125-150% of the mortgage payment. For example, if your mortgage payment is £800/month, you’ll typically need rental income of £1,000-£1,200/month.
- Company financials: Lenders will examine:
- Existing property portfolio (if any)
- Company accounts and trading history
- Director’s personal credit history
- Business plan for the property investment
- Stress testing: Lenders apply stress tests to ensure affordability if rates rise. Common stress rates are 5.5-6.5%, regardless of the actual product rate.
- Loan to Value (LTV): Most limited company BTL mortgages max out at 75% LTV, with better rates available at lower LTVs.
Tax Considerations for Limited Company Landlords
The tax treatment is one of the main reasons landlords choose limited companies. Here’s how it works:
Corporation Tax
Your company pays corporation tax on its profits (rental income minus allowable expenses). The current rates are:
- 19% for profits up to £50,000
- 25% for profits over £250,000
- Marginal relief between £50,000-£250,000
Dividend Tax
When you extract profits as dividends, you’ll pay dividend tax at:
- 8.75% (basic rate)
- 33.75% (higher rate)
- 39.35% (additional rate)
Stamp Duty Land Tax (SDLT)
Limited companies pay the higher rates of SDLT on property purchases:
- 3% on properties up to £250,000
- 8% on £250,001-£925,000
- 13% on £925,001-£1.5m
- 15% above £1.5m
Capital Gains Tax
When selling property, companies pay corporation tax on gains (19-25%) rather than the higher capital gains tax rates that individuals pay (18% or 28%).
Step-by-Step Guide to Getting a Limited Company BTL Mortgage
- Set up your company: Use a specialist accountant to set up a proper SPV (Special Purpose Vehicle) limited company for property investment.
- Build your team: You’ll need:
- A specialist buy to let mortgage broker
- A property-savvy accountant
- A solicitor experienced with limited company purchases
- Find the right property: Consider yield (aim for 5-7%+ gross), capital growth potential, and rental demand.
- Get an Agreement in Principle: Your broker will help you secure this based on the company’s projected rental income.
- Make an offer: Be prepared to move quickly in competitive markets.
- Complete the mortgage application: This will require:
- Company documents (incorporation certificate, accounts)
- Property details (valuation, EPC, tenancy agreement if let)
- Director’s personal financial information
- Complete the purchase: Your solicitor will handle the legal work and mortgage completion.
- Manage the property: Set up proper accounting systems to track income and expenses for tax purposes.
Common Mistakes to Avoid
Many landlords make costly errors when setting up limited company structures:
- Using the wrong company type: Don’t use your trading company – set up a dedicated SPV for property.
- Poor accounting: Mixing personal and company funds can cause tax problems.
- Ignoring stress tests: Ensure your rental income covers payments at 5.5-6.5%, not just the actual rate.
- Over-leveraging: Higher LTVs mean higher rates and less cash flow buffer.
- Not planning for voids: Always budget for 1-2 months’ empty periods per year.
- Forgetting about costs: Factor in arrangement fees, valuation fees, legal costs, and higher SDLT.
Alternative Financing Options
If you struggle to qualify for a limited company BTL mortgage, consider these alternatives:
- Commercial mortgages: For properties with 4+ units or mixed-use
- Bridging loans: Short-term finance for refurbishment projects
- Development finance: For new build or conversion projects
- Private lending: Higher rates but more flexible criteria
- Joint ventures: Partner with other investors to share costs
Future Outlook for Limited Company BTL Mortgages
The market for limited company buy to let mortgages continues to evolve. Key trends to watch:
- Increasing competition: More lenders are entering the market, which should drive rates down
- Green mortgages: Better rates for energy-efficient properties (EPC A-C)
- Portfolio lending: More products for landlords with 4+ properties
- Digital applications: Faster processing with online portals
- Regulatory changes: Potential new rules on affordability assessments
Expert Tips for Maximising Returns
To get the most from your limited company BTL investment:
- Shop around: Use a whole-of-market broker to find the best rates
- Consider 5-year fixes: Often better value than 2-year deals when rates are rising
- Improve EPC ratings: Properties with EPC C or above get better rates
- Build a relationship with a lender: Some offer better rates to existing customers
- Time your purchases: Buy when you can put down larger deposits for better LTVs
- Use offset mortgages: If you have company cash reserves, these can reduce interest
- Review regularly: Remortgage every 2-3 years to ensure you’re on the best rate
Authoritative Resources
For official information and guidance:
- UK Government: Private Rented Sector Tax Relief
- Which?: Buy to Let Limited Company Mortgages Guide
- University of Cambridge: UK Housing Review (Annual Report)
Frequently Asked Questions
Is it better to buy property through a limited company?
For most landlords with 3+ properties or higher-rate taxpayers, yes. The tax advantages typically outweigh the slightly higher mortgage rates. However, every situation is different – consult a tax advisor.
Can I transfer my personally owned properties to a limited company?
Yes, but it triggers capital gains tax and potentially higher SDLT. Many landlords use a “hybrid” approach, keeping some properties personal and buying new ones through the company.
What’s the minimum deposit for a limited company BTL mortgage?
Typically 25% (75% LTV), though some specialist lenders offer 80% LTV products for experienced landlords with strong applications.
Can I get a limited company BTL mortgage with bad credit?
It’s challenging but possible with specialist lenders. You’ll likely need a larger deposit (30-40%) and may pay higher rates.
How many properties can I have in one limited company?
There’s no strict limit, but lenders typically prefer to see no more than 10-15 properties per company. Some landlords create multiple SPVs for larger portfolios.
What happens if my limited company can’t pay the mortgage?
The lender can repossess the property, but your personal assets are protected (unless you’ve given personal guarantees). This is the key advantage of limited liability.