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Buy-to-Let Mortgage Tips for SPVs: A Comprehensive Guide for Property Investors

Buy-to-Let Mortgage Tips for SPVs: A Comprehensive Guide for Property Investors
Using a Special Purpose Vehicle (SPV) for buy-to-let investments is a smart move for landlords seeking tax efficiencies, streamlined borrowing, and greater long-term flexibility. Many lenders, including Kent Reliance, Fleet Mortgages, Landbay, Keystone Property Finance, LendInvest, and HTB (Hampshire Trust Bank), now offer tailored products designed specifically for SPVs.

This guide shares tips to help you navigate the buy-to-let mortgage process for SPVs and explores how these leading lenders support property investors.

Why Use an SPV for Buy-to-Let Investments?

1. Tax Efficiency

SPVs provide significant tax advantages:

  • Mortgage Interest Deduction: SPVs can deduct 100% of mortgage interest as a business expense.
  • Lower Tax Rates: Corporation tax (currently 19%) is more favourable than higher personal tax rates (40% or 45%).

    • 2. Simplified Borrowing

    Lenders prefer SPVs over trading companies because they are:

  • Set up solely for property investment.
  • Registered with appropriate SIC codes, such as 68100 or 68209.

    • 3. Increased Borrowing Potential

    SPVs benefit from lower affordability thresholds, often requiring 125% Interest Coverage Ratios (ICRs) compared to 145% for individual landlords.

    Top Tips for Securing a Buy-to-Let Mortgage for Your SPV

    1. Register the Correct SIC Codes

    Your SPV must use appropriate SIC codes to align with lender requirements. Common codes include:

    • 68100: Buying and selling of own real estate.
    • 68209: Letting and operating of own or leased real estate.
    • 68320: Management of real estate on a fee or contract basis.

    Tip: Double-check your SIC codes during incorporation to avoid delays or rejection.

    2. Research Specialist Lenders

    Not all lenders cater to SPVs, but many specialise in this market. Here’s how some of the top lenders compare:

    Kent Reliance:

    • Known for supporting landlords with large portfolios or complex cases.
    • Offers high LTV options and bespoke lending for HMOs and multi-unit blocks.

    Fleet Mortgages:

    • Specialises in SPVs holding Houses in Multiple Occupation (HMOs).
    • Provides interest-only and repayment options with competitive rates.

    Landbay:

    • A tech-forward lender focusing on rental income for affordability.
    • Offers quick approvals and streamlined application processes.

    Keystone Property Finance:

    • Flexible lending criteria, including options for landlords with adverse credit.
    • Competitive fixed-rate products designed for professional landlords.

    LendInvest:

    • A fintech lender known for fast approvals and flexible terms.
    • Supports professional landlords and developers with bespoke solutions.

    HTB (Hampshire Trust Bank):

    • Tailored products for experienced landlords with complex portfolios.
    • Bespoke solutions for HMOs and multi-unit properties.

    Tip: Work with a broker who understands SPV mortgages to find the lender best suited to your needs.

    3. Prepare a Comprehensive Application

    SPV mortgage applications require additional documentation compared to personal applications. Be prepared to provide:

  • Company Incorporation Details: SIC code, registration documents, and business plan.
  • Director Information: Financial history and identification of all directors.
  • Personal Guarantees: Most lenders require directors to personally guarantee the loan.

    • 4. Understand ICR and Stress Testing

    SPV mortgages calculate affordability differently than personal buy-to-let loans:

    • ICRs for SPVs: Typically 125% of mortgage interest payments.
    • Stress Testing: Lenders test affordability at higher interest rates to ensure rental income can cover repayments.
    Example: For a £200,000 mortgage with a 5.5% stress rate, rental income must be at least £1,150/month to meet a 125% ICR.

    5. Compare Rates Beyond Interest

    While interest rates are important, also consider:

  • Fees: Arrangement fees, valuation fees, and early repayment charges (ERCs).
  • Loan Terms: Fixed or variable rates, interest-only options, and flexibility.
  • Lender Reputation:Choose lenders with a strong track record in SPV lending.

    • Common Pitfalls to Avoid

    Using the Wrong SIC Code: Incorrect SIC codes can delay applications or lead to rejection. Ensure your code aligns with your business activities.
    Ignoring Personal Guarantee Requirements: Directors must be prepared to personally guarantee SPV loans, exposing them to some level of financial risk.
    Overlooking Fees: SPV mortgages may come with higher rates and fees. Always calculate the total cost of borrowing to assess affordability.
    Skipping Tax Advice: While SPVs offer tax benefits, they also come with accounting and compliance costs. Consult a tax advisor to understand your full obligations.

    Case Studies

    1: Expanding a Portfolio with Kent Reliance

    Scenario: A landlord with multiple properties sets up an SPV to purchase an HMO for £500,000.

    Challenge: High LTV requirement.

    Solution: Kent Reliance offers a 75% LTV mortgage, enabling the landlord to leverage equity for portfolio expansion.

    2: Speedy Approval with LendInvest

    Scenario: A property developer needs quick financing for an auction purchase.

    Challenge: Tight deadline for completion.


    Solution: LendInvest approves the loan within two weeks, allowing the developer to meet the deadline and secure the property.

    3: Flexibility for Complex Portfolios with HTB

    Scenario: An experienced landlord sets up an SPV to manage a portfolio of HMOs and multi-unit blocks.

    Challenge: Managing multiple property types.

    Solution: HTB provides a bespoke solution tailored to the landlord’s needs, supporting long-term growth.

    FAQs

    Q 1. Can SPVs secure mortgages without trading history?

    Ans: Yes, many lenders cater to new SPVs as long as they are correctly set up.

    Ans: Yes, but the tax efficiencies often offset the higher interest rates.

    Ans: No, but lenders like Kent Reliance, Fleet Mortgages, Landbay, Keystone, LendInvest, and HTB specialise in SPV lending.

    Ans: Key documents include company registration details, business plans, and personal guarantees from directors.

    Ans: Yes, but this may incur stamp duty and capital gains tax. Always seek advice before proceeding.

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