Can a limited company get a mortgage?

As a business owner, you may have a significant cash reserve, sometimes enough to get a mortgage or purchase some property outright.

If this is you, you’re probably looking for ways you can use this money to help finance a purchase. But can you do this through your business? And is it worth your time?

Let’s find out.

Can I get a mortgage through my limited company?

Sometimes yes – but this is usually unlikely and requires certain scenarios to be in your favour.

Consider why you’re thinking about getting a mortgage. Is it because you think purchasing a property through a business will work in the same way it would as a sole trader? Or do you just not have enough cash to buy a property outright?

A common scenario for a company director would be to use the money in their business to finance a mortgage/deposit and use withdrawals or a director’s loan to fund it.

In some cases, setting up a brand new business to buy and sell property may be the method you’re looking for.

So how does that work?

Buying a residential property through the business

If you buy a residential property through your business, you can’t live in it as a company director.

Instead, you’d use said property to earn rental income and let it out – usually through a separate agency.

This method of business is used in the ‘buy to let’ business model and normally involves forming a new company with the sole purpose of investing in property.

The company that buys the residential property is known as an “SPV”, or Special Purpose Vehicle – it only exists to hold property investment.

Currently, the market isn’t great for mortgage lenders to provide mortgages to limited companies, so you may struggle to find a suitable solution.

If you decide to set up an SPV, ensure you’ve got the appropriate SIC codes – they describe the type of business you’re undertaking.

There are tax advantages when setting up a residential property business – but make sure you speak to an adviser before you proceed with the company formation.

Is it better to buy a property through a company?

Sometimes, yes, Other times, no.

Currently, the market is limited when offering mortgages to limited companies, partly due to the lack of competition. Rates and deals will be more expensive when a business buys a property for rental.

It may be, however, that this model does work for you – if you have large savings, these can be invested straight away into property, and give you more autonomy over any deal or mortgage.

Every case is unique and it’s always best to speak to an adviser. To get you thinking, though, here are a few pros and cons:

Pros to buying a house through a company

  • Saving on corporation tax – rental income profits on a house bought through a limited company won’t be taxed on your earnings as an individual, and will instead be taxed through the company. There will still be taxes when you withdraw profits, though.
  • Inheritance tax benefits – at the time of writing, it’s possible to use tax advantages and differences when the property is held in a company.

Cons to buying a house through a company

  • Bad mortgage deals – the market is less competitive, so rates and deals are more expensive.
  • A tax bill will come eventually – you won’t be taxed when you start making money from the rental; you’ll be taxed once you decide to withdraw money from your business as dividends.

How to buy a house through your business

Talk to an accountant or an advisor before you go any further – discussing your situation will give you a clear indication of what to do next.

Then contact a specialist mortgage advisor, who can find you the best deal and broker to suit your needs.

Final thoughts

Getting a mortgage through a limited company has some clear pros and cons. The market at present makes it a less attractive option for many.

Buying property through a business can be a good business model in the right circumstances, but for others, it simply isn’t appropriate. We’d always advise caution wherever possible.

Speak to us about your business setup, and whether getting a mortgage through your limited company would be a good option for you.

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