Typically, buy to let lenders prefer to offer mortgages to limited companies set up under an SPV (Special Purpose Vehicle). What does this mean, why are they so popular, and how can you get one?
What is an SPV?
An SPV limited company is a company set up solely for holding property. Lenders will generally prefer these companies over trading companies, as they are much simpler to underwrite and therefore make the application easier, as they are considered lower-risk.
Why do landlords invest in this way?
There has been a drastic increase in mortgage applications through SPV limited companies since the introduction of the income tax relief restrictions on landlords. This is simply down to many viewing a limited company as a more tax-efficient method of investing. However, it’s important to seek professional tax advice before making any property investment decisions.
Mortgages for Business’ latest Buy to Let Index (Q1 2022) reveals that 63% of lenders now offer buy to let mortgage products to limited company applicants, with an increase of 1,304 products in Q1 this year alone.
The benefits for landlords using an SPV limited company mean that as a brokerage, we frequently get asked how to set one up. To do this, you can speak with an accountant, or visit the Companies House Website to set up the company yourself.
Is it expensive to set up an SPV Limited Company?
No – setting up an SPV limited company costs just £12 and can take a matter of minutes to set up.
If you already have a company, to meet SPV criteria, lenders are looking for:
- The correct SIC code for letting and holding property
- No trading profits through the company for anything other than property
The lender may still offer to your company if it traded historically, so long as the company has the correct SIC code and there is confirmation that the company only intends to be used for letting property going forwards.
What is a SIC code, and how do I get one?
The Standard Industrial Classification of Economic Activities, or SIC, is used to identify a business establishment by its economic activity. You can use the official Condensed SIC list on the government website to get one for your company.
Property investors using a limited company will need a SIC code when filling out the SPV’s Annual Return with Companies House.
Buy to Let mortgages for non-SPV limited companies
As mentioned above, SPV limited companies must have no trading go through the business other than holding property. As such, trading companies have fewer options available when sourcing a mortgage; however, this doesn’t make it impossible. Our mortgage brokers can search the whole of the market for a solution tailored to your needs, whether this is for an SPV limited company application or a trading company. Get in touch here.
Mortgages for Business will be exhibiting at the Property Investor Show