Landlords have faced increased costs due to having to pay extra stamp duty and more tax. Since limited companies are taxed at a lower rate, many landlords have set up limited companies that own their properties.
Quoting figures from Moneyfacts, the article said that there are 313 commercial mortgage deals currently available for limited companies, which represents 20% of mortgages for the buy-to-let market. A year ago, these mortgages represented 10% of the market, and five years ago, mortgages for limited companies were just 5% of the market.
Charlotte Nelson of Moneyfacts said:
“As the reality of April’s tax changes starts to bite, the proportion of deals available to limited companies has grown dramatically, having increased by 7% in just six months. With the extra pressure in the BTL market and the added interest in limited companies, it is no surprise that lenders have leapt into action and started offering more deals to limited companies.”
The downside to forming limited companies to purchase property is that interest rates for limited company mortgage deals tends to be more expensive than commercial mortgages for individual landlords. Forming and running a limited company is complex, which is why Nelson says that creating limited companies is not a strategy suitable for all landlords.
A mortgage broker can find the best commercial mortgage deals for both individual landlords and limited companies.