TSLE16: Limited companies will become mainstream in buy to let – 3mc

Addressing an audience at Mortgage Solutions’ Specialist Lending Event, Hall (pictured) described complex buy-to-let as those cases that did not fit the requirements of mainstream lenders operating in the sector.

Hall added that more lenders had started to offer limited company options following the Chancellor’s announcement last year that mortgage interest relief claimed by landlords would be cut to the basic rate of 20% from 2017.

He said: “We did a marketing exercise out to our intermediary base recently. Of the eight lenders that we have on panel that offer limited company [mortgages], five of those offered rates that started with a three. I think that’s becoming more competitive.

“There’s a market there, it is going to grow. I think that the limited company space will take more of the market share within the buy-to-let space as it starts to grow. You might see investors looking to spread their risk as they expand their portfolios.”

Hall explained it was important to be aware of the tax implications when transferring properties across from an individual name into a limited company.

He said that some investors were likely to want to use the equity in their company as a deposit, which could be achieved by using a director’s loan, whereby money is borrowed by the investor’s company, but noted that these would also be subject to tax.

“What we have seen a lot of is the investor wanting to move their individual name into a limited company. When you move a property from an individual, into a limited company, legally it’s a purchase,” Hall added.

“Even though they already own the property it’s moving it from one legal entity to another. So there’s Capital Gains Tax implications and Stamp Duty implications too.”