Limited Company Buy to Let Mortgages

Limited company buy-to-let mortgages let a company, rather than an individual, borrow against a rental property. They work in broadly the same way as a personal buy-to-let mortgage, assessed on the rent the property will generate rather than the borrower's salary, but the criteria, pricing and paperwork are geared towards a company structure rather than a person.

This guide covers the difference between an SPV and a trading company, typical lending criteria, why personal guarantees are still required, the rate premium you should expect, and a practical tip for finding the right lender.

SPV vs trading company

Almost all limited company buy-to-let lending is written for a special purpose vehicle (SPV), a company set up specifically to hold property and do nothing else, usually with a SIC code that reflects letting or property investment. Lenders like SPVs because the company's finances are simple and easy to assess: there is no other trading activity to complicate the picture.

A trading company, one that already runs another business and wants to hold a rental property as a side asset, is a much harder sell. Far fewer lenders will consider it, because the property sits alongside other assets and liabilities that make the company's overall risk harder to isolate, and a lender assessing the mortgage has to look through the whole company's accounts rather than a single clean property. If you are buying your first company-owned buy-to-let and do not already have a trading company for another reason, setting up a clean SPV is almost always the simpler and cheaper route, and it also keeps rental profit ring-fenced from any other business risk. Setting one up is quick and inexpensive, typically a same-day process through Companies House with a small filing fee, though most landlords ask an accountant to set the SIC code and share structure up correctly from the start rather than fixing it later. Our limited company buy to let guide covers the wider tax case for using a company structure at all.

Criteria

Lenders assess a limited company application on similar principles to a personal buy-to-let application, with some differences:

• Rental cover. The rent must cover the mortgage interest at a stressed rate by a set margin, known as the Interest Coverage Ratio (ICR). Limited company applications are typically assessed at 125% ICR, at a stress rate commonly around 5.5%, regardless of the director's personal income tax band. This is one of the reasons company borrowing appeals to higher rate taxpayers, since a personal-name application from the same person is often stressed more harshly, around 145%, because of the Section 24 tax mismatch.
• Deposit. Maximum loan-to-value is broadly similar to personal buy-to-let lending, commonly up to around 75%, though some specialist lenders go higher for straightforward properties and lower for HMOs or new-build flats.
• Director experience and income. Many lenders want at least one director to have some existing landlord experience or a minimum personal income, particularly for a first application, though this varies a lot between lenders.
• Company structure. Lenders will want to see a simple shareholding, usually with the directors as the beneficial owners, and may decline or price differently if the company has an unusual ownership structure or an offshore parent.
• Property type. Standard buy-to-let flats and houses are widely lent against. HMOs, new-build flats, and properties above commercial units attract a smaller pool of specialist lenders and sometimes a higher rate.

A worked example. Say a company wants to borrow £180,000 against a property renting for £1,200 a month (£14,400 a year), and the lender applies a 125% ICR at a 5.5% stress rate. The stressed annual interest on the loan is £180,000 × 5.5% = £9,900. The minimum rent required to pass is £9,900 × 1.25 = £12,375 a year, or £1,031 a month. Since the actual rent of £1,200 a month comfortably clears that figure, the loan passes the rental cover test. If the same director applied in their personal name as a higher rate taxpayer, the lender might apply a 145% ICR instead, pushing the minimum required rent to £9,900 × 1.45 = £14,355 a year, or £1,196 a month, which would leave far less headroom on the same loan and property.

Personal guarantees

Almost every limited company buy-to-let mortgage requires a personal guarantee from the company's directors, sometimes called a deed of guarantee. This means that if the company cannot meet its mortgage payments, the lender can pursue the director personally for the shortfall, in much the same way as if the mortgage had been in their own name.

This surprises some first-time company landlords, who assume that limited liability protects them from the mortgage debt in the same way it protects them from most other company liabilities. It does not, for mortgage lending specifically. The tax benefits of a company structure are real, but they do not extend to removing your personal exposure to the mortgage itself, and that is worth being clear-eyed about before you commit. Our limited company buy to let guide sets out the tax side of the comparison in full.

Rate premium

Limited company buy-to-let mortgages typically carry a rate premium over an equivalent personal-name product, along with higher arrangement fees in many cases. The exact gap moves with the market, but it is a genuine, ongoing cost that needs to be weighed against the tax saving from Section 24, not treated as a rounding error.

Whether the premium is worth paying depends on your numbers. For a highly leveraged property owned by a higher or additional rate taxpayer, the tax saving from avoiding the Section 24 mismatch usually outweighs a higher mortgage rate comfortably. For a lightly geared property owned by a basic rate taxpayer, the company route often costs more in mortgage terms than it saves in tax, since the Section 24 effect barely bites at that tax band in the first place. Our buy-to-let mortgage calculator is a useful starting point for comparing the actual borrowing cost of each option side by side.

Fees are also structured a little differently in this market. Some lenders charge a percentage-based arrangement fee rather than a flat amount, which becomes more significant on a larger loan, and a handful of specialist lenders add the fee to the loan rather than requiring it upfront, which spreads the cost but means you pay interest on it for the life of the fixed rate. Always compare the total cost over the initial fixed period, fees included, rather than the headline rate alone.

Broker tip

Limited company buy-to-let lending is a smaller, more specialist market than mainstream personal-name lending, and criteria vary more between lenders. A broker who places company buy-to-let cases regularly will usually know which lenders are comfortable with your specific situation, whether that is a first-time company landlord, a portfolio landlord adding another SPV property, or an HMO held through a company, and can save you from applying to a lender whose criteria were never going to fit.

Before you speak to a broker, have the company's incorporation documents, a copy of the SIC code, personal income evidence for each director, and details of any other properties already owned personally or through the company ready to go. Portfolio landlords in particular should expect lenders to want a full schedule of existing borrowing, since our portfolio landlord rules guide explains how lenders treat anyone with four or more mortgaged buy-to-let properties as a distinct, more heavily documented category.

How Property HQ helps

Property HQ tracks every mortgage, whether held personally or through a limited company, in one place, with fixed-rate end dates and rental cover flagged before they become urgent, so preparing for your next SPV application or remortgage is a lookup rather than a paperwork hunt.

Disclaimer

This guide is general information for UK landlords, not legal, tax or mortgage advice. Check GOV.UK, HMRC or a qualified adviser for your situation.