Five essential tips for a smooth limited company BTL mortgage application – Wilde

At Paragon, we’ve seen firsthand how the right preparation can make all the difference when brokers support clients using limited companies for property investment.

Here are my top five tips to help you and your clients navigate the application process efficiently and successfully.

1. Understand the business structure
   Before you start any application, it’s crucial to get under the bonnet of your client’s limited company. Ask about the company’s SIC (Standard Industrial Classification) codes – these define the nature of the business. While there are a handful of lenders who will lend to trading limited companies, the majority, including Paragon, look for special purpose vehicle (SPV) codes that indicate the company is used solely for rental purposes. If the company was set up for another trade and later repurposed for property investment, be prepared to explain this and highlight any potential underwriting challenges. Always check the main trading activity and ensure the company’s accounts reflect rental income as the sole source.
2. Ensure financial transparency
   Lenders expect the company’s turnover to match its rental portfolio. For example, a £100,000 rent roll should be mirrored in the accounts. If turnover is significantly higher, it could indicate other income streams, which may complicate underwriting. Minor additional income, such as a small amount from commercial lets, may be acceptable, but if non-BTL income exceeds rental income, the application may fall outside lending criteria. Full transparency here speeds up the process and avoids surprises down the line.
3. Clarify directors and shareholders
   Directors are the decision-makers and must be applicants on the loan. Shareholding is equally important; at Paragon, we typically require applicants to collectively hold at least 80% of the company’s shares. This allows for up to 20% to be held by children or other parties without needing to include them in the application. However, if children or non-applicants hold significant shares, the structure may not meet lending criteria. Every lender has its own rules, so check these before submitting an application.
4. Map out group structures and beneficial ownership
   If the SPV is owned by another limited company, lenders need to know who the ultimate beneficial owners are. At Paragon, we require the structure to ‘mirror’ across entities, meaning the same directors and ownership throughout. This ensures transparency and prevents individuals from indirectly influencing the property company without being applicants. Understanding and documenting these relationships upfront will help avoid delays.
5. Be clear on deposits and intercompany loans
   Clarify the source of the deposit early – for example, will it come from personal savings and be introduced to the company as a director’s loan, or retained profits from the director’s other business via an intercompany loan? Clarify just how this will appear in the company accounts going forward.

Some sources may require more documentation to verify legitimacy and ownership rights. While Paragon generally accepts intercompany loans, not all lenders do, and the borrower must have rights to the funds being transferred. If the arrangement is complex, check with the lender before proceeding. And don’t forget: professional tax advice is vital, as limited company ownership isn’t the best route for every landlord.

By asking the right questions and gathering the necessary information upfront, brokers can help their clients achieve a smoother, faster, and more reliable mortgage application process.