We sat down with Matthew McCullough (pictured), national sales manager at Aldermore, to discuss limited company lending, special purpose vehicles (SPV) and how mortgage brokers can support their clients.
The Buy To Let Market Forum kicks off on 19 April in Bolton with events also taking place in Worcester, Cardiff and West Sussex.
To register for the event and find out more follow this link.
Q: Limited company buy-to-let has become increasingly popular over the past few years due to tax changes, do you expect its popularity to grow?
A: The question of whether the buy-to-let (BTL) market is experiencing growth is currently a subject of intense debate, given the challenging economic environment and strict affordability standards.
However, one trend that is worth noting is the increasing popularity of limited company lending. This approach has several advantages for landlords, including lower interest coverage ratio (ICR) requirements, which can help them expand their portfolios despite the affordability challenge.
In addition, many landlords are transitioning from individual ownership to corporate structures to take advantage of well-documented tax benefits. This shift towards corporate borrowing is likely to continue driving the growth of limited company lending in the BTL market.
Q: What are the benefits of limited company and who is it best suited for?
A: The benefits of moving properties into a company structure are highly dependent on individual circumstances. However, based on my observations, I have noticed two distinct trends emerging.
Firstly, larger landlords – typically those who own five or more properties – are seeking expert tax advice and, where costs allow, transitioning their properties to a company structure to benefit from tax advantages.
Secondly, there is a growing trend of acquiring new properties into SPVs, which can provide a combination of benefits including tax savings, improved affordability, and legacy planning opportunities. While each landlord’s situation is unique, these trends suggest that there may be significant advantages to exploring the option of moving properties into a company structure or acquiring new properties through an SPV.
Q: What finance options and structures are you recommending in the current environment? Has it changed?
A: The landscape of property ownership has undergone a remarkable shift in recent years, with a surge in limited company lending and the creation of special purpose vehicles (SPVs).
While I cannot prescribe a specific course of action, I would advise landlords to proceed with caution and seek guidance from both a knowledgeable mortgage broker and a tax specialist before making any moves. By doing so, they can ensure that they are taking the most appropriate steps for their unique circumstances, safeguarding their financial wellbeing and the success of their investments.
Q: What advice would you give to brokers with buy-to-let clients at the moment?
A: As a mortgage broker, there are two key actions you can take to support your landlord clients during these challenging times.
Firstly, it is more important than ever to maintain regular communication with your clients. By checking in more frequently, you can offer the guidance and support that they need to navigate the tough market conditions. Furthermore, more regular conversations can help ensure that their portfolio administration is up to date, making the process of placing their next case much smoother.
Secondly, it’s vital to collaborate with an accountant or tax expert. By staying ahead of your clients’ next move and providing proactive guidance, you can streamline the mortgage application process and minimise the back-and-forth communication between all parties involved. By taking these two actions, you can build stronger relationships with your clients and help them achieve their property investment goals more effectively.
