State Bank of India declares support for limited company buy to let

SBI UK said it recognised that changes to the tax system mean landlords’ tax could double or even triple in some cases.

UK landlords are increasingly turning to special purpose vehicles (SPVs) to mitigate the rise in costs as they are limited companies and income can be taken as dividends.

Sanjiv Chadha, regional head for SBI UK, said: “We believe landlords will increasingly use a limited company structure for their property portfolios and this trend cannot be ignored. As such we are keen to support those investing through SPVs and the mortgage brokers serving them.”

However, SBI UK said only 16% of all buy-to-let mortgages are currently available to investors through SPVs. Only a small proportion of providers offer SPV mortgages due to a perceived higher risk of lending, increased complexity and cost of underwriting the applications.

Many mortgage providers charge a higher rate for SPV mortgages. SBI UK referred to Mortgages for Business figures that show the average buy-to-let mortgage rate on the market is 3.3%, 1% less than the average rate of 4.3% for SPVs.

The bank said its average SPV rate is 3.22%, only 0.5% higher than its buy to let rates.

“SBI UK is willing to work with any professional landlord that is interested in an SPV, whether they are opening one for the first time or remortgaging an existing SPV,” said Chadha.

He added: “However, if they are considering borrowing through an SPV for the first time, they must be a professional landlord with a proven track record. An SPV doesn’t have experience, but a landlord does and that is what we will assess as a part of our underwriting process.”

SBI UK requires investors to have a minimum income from their properties of £25,000.