How Limited Company Buy-To-Let Mortgages Work

More landlords than ever are holding property through limited companies in 2025. This shift is driven partly by the impact of Section 24 restrictions on mortgage interest relief, and partly by longer-term planning for succession and refinancing flexibility. While limited company borrowing is now mainstream, the way lenders assess applications differs in several important ways compared with personal names. Understanding these differences can help you avoid surprises and choose the right structure for your portfolio.

Why Landlords Use Limited Companies

Although tax is often mentioned, there are multiple commercial reasons why landlords may prefer a company structure:

• Succession planning – shares can be transferred more easily than individual properties.
• Portfolio growth – profits can be retained within the company to reinvest, rather than drawn personally.
• Flexibility on refinancing – lenders increasingly accept SPV companies as borrowers.
• Clarity for partners or family members – ownership can be expressed through shareholdings.

That said, company borrowing is not automatically better for everyone. Costs and criteria differ, so the decision must be commercial, not just tax-driven.

How Lenders Assess Limited Company Applications

Most limited company buy-to-let mortgages are available only to Special Purpose Vehicles (SPVs), which are companies set up solely to hold and let property. Lenders typically require:

• Personal guarantees from all directors and major shareholders (usually 20%+).
• SPV structure – registered at Companies House under accepted SIC codes relating to property letting.
• Clear accounts – even if new, directors must demonstrate income and property experience.
• Underwriting at director level – affordability and credit history of individuals are still checked.

Trading companies that engage in other activities are often excluded, although some specialist lenders will consider them.

Differences in Product Choice

In 2025, the product range for limited company BTL is broader than ever. Key differences compared with personal borrowing include:

• Rates – company products are often 0.25–0.75% higher than personal equivalents, although this gap has narrowed.
• Fees – arrangement fees of 1–2% are common.
• LTV limits – typically capped at 75%, with some lenders offering 80% for strong cases.
• Product variety – more five-year fixes are available, helping with affordability testing.

Despite higher costs, many landlords accept these trade-offs because the overall structure suits their long-term plans.

How Affordability Testing Differs

A major advantage of limited company borrowing is the lower stress test hurdle. While personal borrowing is often tested at 145% of interest at a stressed rate, companies are typically tested at 125%. This can make a material difference to how much you can borrow.

Example:

• Loan: £200,000 at 5% pay rate = £10,000 annual interest.
• Personal name (145%): needs £14,500 rental income per year (£1,208 per month).
• Limited company (125%): needs £12,500 rental income per year (£1,042 per month).

For marginal cases, the limited company route may be the only way the deal stacks up.

Risks and Complexities

Before switching to a company structure, landlords should be aware of the added responsibilities and risks:

• Personal guarantees – directors remain personally liable if the company defaults.
• Accountancy costs – company accounts and filings add overheads compared with personal ownership.
• Complexity of refinancing – moving existing stock into a company structure may trigger tax and SDLT considerations unless planned carefully.
• Higher product costs – while the gap is narrowing, interest rates and fees are usually higher.

Case Study: Moving from Personal to Limited Company Mortgages

Scenario: A landlord with three properties in personal names wanted to expand further but could not pass affordability on two refinances due to the 145% stress test.

Solution: They incorporated into an SPV and refinanced using lenders who applied a 125% coverage ratio. Although the rates were 0.5% higher, the structure allowed sufficient borrowing to release equity and buy two further properties.

Outcome: Portfolio value and rental income grew significantly, outweighing the slightly higher finance costs.

Tips for Landlords Considering Limited Company Borrowing

• Check your company SIC codes align with lender requirements before applying.
• Keep clear records of director income and property experience – lenders will ask for these.
• Work with accountants and solicitors who understand property SPVs to avoid compliance issues.
• Consider the long-term commercial rationale, not just short-term tax reliefs.

Final Thoughts

Limited company buy-to-let mortgages are no longer niche. They are a mainstream option with their own rules, advantages and drawbacks. By understanding how lenders assess applications and what makes them attractive, you can decide if this structure supports your wider portfolio goals in 2025 and beyond.

Speak to Our Sponsor

Our sponsor works daily with landlords using limited company structures. They can review your plans, match you with lenders comfortable with SPVs, and ensure your application highlights both your company and personal strengths.