In the last quarter of 2017, nearly three-quarters (72%) of buy-to-let mortgages were for limited companies. The number of buy-to-let mortgage products available for limited companies rose by 21% at the end of 2017, reported BridgingAndCommercial.co.uk this month.
The majority of these mortgages were for new property purchases by limited companies, but many were for landlords forming companies then remortgaging existing property to be sold to the company.
There are tax advantages in forming limited companies: corporate tax can be lower than individuals pay, and landlords that are on high tax rates have had a reduction in the tax relief on commercial mortgage interest repayments. Also, limited companies have not been affected by these changes.
Limited companies are not beneficial for all landlords, especially ones who have just one or two properties. There are costs involved in setting them up, and there are administration expenses to pay. Landlords who are considering forming a limited company should seek expert professional advice, or talk to a commercial mortgage broker to discuss the options for financing a buy to let business.
If a landlord decides to form a limited company to run their property business, there are a variety of commercial mortgages suitable for limited companies. Although interest rates will be higher than standard mortgages, rates are still low. A sound business plan can result in good rental yields for buy-to-let properties, especially outside of London and the South East.