SPV mortgages- What are they, how do they work and where’s best to get one? Find out here…
We receive a lot of enquiries about special purpose vehicles (SPVs). You might be looking to buy a property investment to let and would like to find out if an SPV could help you save on capital gains tax.
You might also be a director in a limited company and want an SPV to protect your personal assets from the business.
We have compiled essential information on SPV mortgages to give you as much detail as possible.
Call to discuss special purpose vehicle mortgages for buy-to-let properties.
We have a few mortgage providers lending SPV limited company mortgages. Speak with a broker to discuss capital gains tax, rental income and any other questions you may have.
What is an SPV? How can it benefit property investors?
A special purpose vehicle (SPV), a legal entity, has been set up as a fenced organisation and is commonly used to reduce financial risk and capital gains tax allowance.
An SPV is an independent company that has separate assets and liabilities. This allows property investors to apply for a buy–to–let mortgage in a limited company instead of their name.
An SPV is a separate entity and can be used to continue operations even if the parent company goes under.
SPVs are typically used to form partnerships, limited partnerships, or joint ventures. However, sometimes an SPV cannot be owned by the company it was created.
What are the benefits of a vehicle with a special purpose?
Landlords considering buying-to-let mortgages through an SPV can often get tax relief. No matter how small or large your property portfolio is, you can reap the tax benefits of purchasing a property through an SPV. This is especially true if you pay a higher rate or additional tax.
You can loan the property deposit to the SPV as a director’s mortgage. This will offset any rent payments profits until the debt is paid off. Thus, the SPV company’s tax liability.
Because the SPV tax liability can be considered separately from your personal tax liability, most lenders will offer a generous rental calculation. This means that you could borrow more to pay the monthly rent.
SPV company mortgages are also available if you wish to purchase property as a group rather than as an individual. This makes splitting shares and delegating financial responsibility for mortgage repayments easier.
An SPV allows you to separate personal property (e.g. a family home) and business property (buy-to-let).
Reputable buy-to-let brokers recommend you talk to a tax advisor about your situation before setting up an SPPV. Send an enquiry to get more information.
What are the requirements to get an SPV BTL mortgage?
Each lender will use their own set SPV mortgage criteria to decide whether or not they’ll approve you. However, this doesn’t mean all lenders will.
Lenders may ask questions about:
- How many properties do you have personally?
- The number of directors who will be responsible for the application. Most lenders allow up to four directors.
- How many shareholders does the company have?
- Credit history
- Type of property
- Where is the property located?
- The property’s loan-to-value
How can I obtain an SPV for the buy-to-let property?
Your borrowing options may be limited if you have never been a landlord. Because lenders view inexperience as a threat, they want to ensure you can find tenants, maintain the property, and repay your mortgage.
However, this doesn’t mean you won’t get a buy-to-let mortgage with an SPV. Some lenders may require a larger deposit or require you to pay higher interest rates. Your personal income may be assessed as part of your application.
What will the property type do to my SPV BTL mortgage
Unfortunately, some lenders will allow you to borrow. Lenders may not be able to lend money to properties that pose a greater risk.
These buildings could include:
- Tower blocks/high-rise flats
- Properties over a shop
- Prefabricated concrete (prefab).
- Timber/wood properties
- Houses with thatched roofs
- Corrugated iron
Some lenders will consider all properties, including nonstandard constructions for buy-to-let mortgages with SPVs. Send us an enquiry, and we’ll contact you to arrange a no-obligation meeting.
How do I create an SPV limited business?
Lenders will require you to register as a new business at Companies House to obtain an SPV to apply for a UK buy-to-let loan. It must be registered in the UK and must also be buy-to-let.
You can start by doing this:
- Create a company using Companies House.
- From the CondensedSIC list, you will need to select what is known as a “SIC code”. Your SIC code can classify your business’s nature, such as real estate.
The experts we work with can help you if you need assistance or your company is already established. Send an enquiry to get going.
What amount deposit is required for an SPV mortgage?
Buy-to-let mortgages typically have a loan-to-value ratio of 85%. However, BTL deposit sizes may vary depending on the lender’s criteria and willingness to lend to someone in your situation.
A larger deposit might be required for bad credit, first-time buyers, or if you already own a portfolio with three or more properties.
Let’s say you have a £200,000 property, and a lender offers an LTV ratio of 15%. To secure your mortgage, you must deposit 15% of £30,000.
Talk to a mortgage advisor to determine how much you will need to deposit with a particular lender. They can assess your situation and help you to determine the right deposit size.
SPV buy-to-let mortgage rates
Limited companies are generally not eligible for the lowest buy-to-let rate. However, specialist mortgage lenders can offer SPV borrowers specific rates and be exceptionally favourable if you can identify the right provider.
An experienced SPV mortgage broker can make the process much easier by finding and comparing the best deals and mortgage rates for you.
Check to ensure your broker has experience with SPV buy-to-let mortgages. While brokers may claim to be “whole market”, meaning they can handle all types of mortgages regarding SPVs, they don’t have the necessary knowledge to recommend the best lenders. This can lead to high-interest rates and rejections of applications.
Send us an enquiry, and we’ll connect you with a broker specialising in SPV mortgages.
What mortgage lenders will accept SPVs?
High street lenders are reluctant to approve buy-to-let loans with SPVs as they consider them more complex. Many lenders stick to traditional mortgages, which may tempt you into personal borrowing.
The government’s tax changes have led to a growth in the SPV mortgage industry over the past few years. Many more lenders now offer SPV products. This increased competition has resulted in more options and better rates for SPV borrowers.
Even if you’ve been turned down by lenders like Paragon or Aldermore and feel that an SPV limited company mortgage cannot be obtained, you should seek out advice.
In certain circumstances, lenders are willing to approve buy-to-let mortgages using a special purpose vehicle. Some of our advisors regularly arrange mortgages with these lenders.
Answered in-depth questions regarding SPV mortgages
SPV mortgages are not the only complicated area. I discuss these areas in my answers to common questions we receive. These answers are available here:
- SPV to increase a portfolio of buy-to-let
- Applying for an SPV even though you have bad credit
- First-time landlord
- Semi-commercial mortgage using an SPV
Why an SPV mortgage broker is important
SPV mortgage brokers will have an extensive network of lenders more likely than others to approve you. This can save you time and help you avoid rejection. This will allow you to avoid paying higher interest and fees.
Talk to an expert about SPV Mortgages.
We are available to answer any questions you may have about SPV mortgage lending. Submit an enquiry today below: