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Specialist Mortgage Brokers for Your SPV Mortgage

Are you looking for SPV mortgages for your Buy-to-Let property investment company? If so, When The Bank Says No can help today!

Your home may be repossessed if you do not keep up repayments on your mortgage. When The Bank Says No is a mortgage broker, and not a lender.

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Finding The Best SPV Mortgage For Your Business

A special purpose vehicle (SPV) is a registered company set up for the purpose of buy-to-let property investment. Instead of the individual(s) investing money directly from their bank account, they set up a company to take advantage of its protections and tax benefits.

When the Bank Says No are mortgage broker specialists with connections with many lenders across the UK. When looking for an SPV mortgage, you need someone on your side who understands the technicalities of applying for a mortgage with a limited company.

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What is an SPV Mortgage?

The idea behind an SPV mortgage is to take advantage of a company’s protections. When an individual takes out a mortgage, they are liable for all debts incurred, as the property purchase is in their name. However, with an SPV Mortgage, all the responsibility is placed on the shoulders of the company, usually a private limited company, rather than an individual.

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What advantages do SPV mortgage offer?

The following are details on the advantages that an SPV Mortgage grants.

  • Ownership – The property purchase is made in the SPV Limited Company name. This means it’s owned by the company, not the individual, and all responsibilities for the property fall on the company.
  • Liability – Liability goes hand in hand with ownership. The liability is on the SPV means all debts, legal fees and obligations fall on the SPV. For example, if rental income is too low to make the mortgage repayments, then the lender is entitled to seize the assets of the company alone. This can include the property and the cash within the company accounts. This eliminates your own financial risk.
  • Taxation – Rental profits are subject to pay corporation tax, which is currently charged at 19% in the UK. For higher-rate taxpayers, this can be a huge advantage, as they may otherwise pay up to 45% of personal income tax. As you can see, this is a huge tax relief. This is due to a company being a business that boosts the economy.
  • Possible Underwriting Advantage – The underwriting of an SPV Mortgage is based on the company’s finances, unlike a standard mortgage which looks at your finances. This means that you’ll need to have a company with sufficient projected income and expenses, such as rental income, maintenance costs etc. So, even if your income is poor, so long as your company has sufficient performance.
  • Higher Loan Amounts – An SPV Mortgage is usually able to access higher loan amounts. This advantage alone allows property investors to expand their portfolios at more rapid rates, or secure funding for larger property purchases. This is particularly true if you already have a strong property portfolio that can demonstrate your ability to generate rental income, as this lowers risk immensely for mortgage lenders. Even if you weren’t planning on using all of the massive loans, have this in your back pocket for emergencies or to capitalise on opportunities when they present themselves.
  • Easy Portfolio Property Management – To own real estate requires administration, which rapidly picks up when you increase the number of properties owned. However, with an SPV Limited Company, your property portfolio becomes so much easier to manage. Rental income, mortgage interest payments, maintenance costs and more are all consolidated within SPV accounts. Adding new properties to the portfolio is as easy as purchasing the property under the company name, and you can sell properties as a company asset.

How do I apply for SPV Mortgages?

Despite the easier management that SPV Mortgages allow, getting one can be a challenge. Lending criteria are strict, and they’ll want to explore your financial records, such as profit and loss statements, balance sheets, and cash flow projections. Furthermore, you’ll require a comprehensive business plan that outlines investment strategy, target market, and projected rental income.

This, in large part, is why mortgage brokers exist. We are experts in the field of mortgages, utilising many connections made over our time in the sector. The following are the types of things a mortgage broker can do for you:

  • Limited Lender Options – Not everyone can be an SPV Buy to Let money-making machine, considering it involves needing a company that generates respectable income. As a result, most lenders prioritise their business models toward more standard mortgages. This makes SPV Limited Companies in need of a more specialist lender, which When the Bank Says No can help with. Through our connections, we have introduced many specialist lenders to candidates who didn’t meet the standard criteria.
  • Negotiation – SPV Mortgages are perceived as a risk unless you can provide fantastic statistics. Nonetheless, they’re likely to come with higher interest rates and fees. Your lowered tax bill will shoulder a good deal of the blow, but it’s inconvenient unless you know how to negotiate interest rates. Negotiation is a huge part of the mortgage broker’s job, we have studied mortgages to the point that we know where the parameters for what will and won’t be accepted lie.
  • Complex Application Process – SPV Mortgages may make everything much easier and simplified, but the initial application process is anything but. You will need extensive documentation, a company account, business plans and proof of rental income projections. On top of this, despite being a separate entity, they may ask for the personal financial information of company directors.

What are the disadvantages of an SPV?

An SPV doesn’t have explicit disadvantages, but they do have elements that you should consider.

  • Financial Reporting – All companies are subject to higher levels of administration than an individual. SPVs must prepare and file annual accounts with Companies House to provide an overview of the company’s financial performance. It doesn’t end there, though – you’ll be required to file corporation tax returns, which can be complex, and depending on the SPV’s activities additional filings may be required which could require some additional staff or external help to take care of it.
  • Privacy – Once registered with Companies House, details of the SPV become available. This includes:
    • Company Name
    • Registered Office Address
    • Director Details
    • Shareholder Details
    • Charges
    • Persons with Significant Control (PSC)

Final Thoughts

Overall, having a mortgage broker in your corner is a great help. As far as we’re concerned, unless your finances are so good that lenders will compete with each other for your business, a mortgage broker is your best bet.

Frequently Asked Questions

What are Capital Gains Tax implications when selling a property owned by SPV?

We will make a direct comparison for clarity.

SPV Limited Company

  • Corporation Tax on Gains – Gains made from the sale of a property are subject to corporation tax, which is 19%. This is a flat rate that applies to all profits made by SPV.
  • No Personal Allowance – SPV Limited Company is not entitled to a tax-free allowance on the capital gain of the property sale.
  • Indexation Allowance – SPVs can claim indexation allowance to offset inflation’s impact.
  • Rollover Relief – SPVs can defer the payment of corporation tax on the capital gain with rollover relief, which is a tax relief.

Individual

  • Capital Gains Tax – All gains made during the sale of a property are subject to Capital Gains Tax.
  • Annual Exemption – Individuals have an annual CGT allowance (currently £12,300). This means they can make up to this amount without having to pay any type of tax.
  • Different Rates – CGT rates are subject to an individual’s income tax band, as well as the personal assets being sold.
  • Private Residence Relief – If the property is the main residence of the individual, then they may be eligible for Private Residence Relief.

The Standard Industrial Classification codes are a set of five numbers used to mark and label the activity that an SPV is currently engaging in primarily. For example:

  • 68100 – Buying and selling of real estate.
  • 68209 – Other letting and operating of own or leased real estate.
  • 68320 – Managing real estate on a fee or contractual basis.
  • 41100 – The development of building projects for SPVs focused on property development.
No. You do not pay income tax for an SPV property because the SPV Limited Company is its entity. Instead, the SPV Limited Company will pay its form of taxes, such as corporation tax.

Yes, SPVs are liable for Stamp Duty Land Tax when buying properties, albeit with less favourable tax treatment than individual buyers.

  • High SDLT Rates – SPVs pay standard SDLT rates that apply to all property purchases. That being said, there’s also an additional 3% surcharge on all residential property purchases, and it applies regardless of whether it’s a first-time purchase or not.
  • No Home Mover Relief – An individual selling a main residence and moving into another can expect a reduced SDLT rate. SPVs are ineligible for this relief, however. Because of this, SPVs are not considered a good method of entry-level property investment.
  • Multiple Dwellings Relief (MDR) Ineligibility – SPVs are not eligible for MDR. MDR reduces the SDLT rate for purchases of multiple dwellings at a time, and its main aim is to support individual buyers in the property market.
  • 15% Rate for High-Value Residential Properties – For all residential properties valued at £500,000 or more, SPVs are subject to a 15% SDLT rate, and this doesn’t include the 3% surcharge.

There is no catch-all rate for SPVs due to the differences between LTV rates, credit history of SPVs etc. However, we do have a way of calculating:

  • Higher Rate than Standard Buy-To-Let Mortgage – SPV mortgage rates are generally higher than the standard buy-to-let mortgage due to the risk factor. SPV rates are typically 0.5% – 1% higher than personal buy-to-let rates.
  • Loan to Value Impact – Most mortgages are influenced by the LTV Ratio. The lower the LTV, the higher the rate.
  • Specialist Lenders – There exist a decent number of SPV mortgages, some of which offer better rates and terms compared to traditional lenders.
  • Creditworthiness and Experience – Credit history and financial health are two of the biggest contributing factors to any individual or financial health of the SPV. A strong track record can help secure better rates.

Generally, the answer is yes. However, every lender has their criteria and restrictions.

  • Director’s Loan – By lending money to the SPV through a director’s loan, you can use the money towards the deposit, or whatever other costs apply to the mortgage. Ensure you have a formal loan agreement in place to avoid tax implications.
  • Personal Guarantee – Some lenders may need a personal guarantee from SPV directors. Meaning, that you’ll be personally liable for the mortgage debt in the case of a default.
  • Combined Income – Some lenders allow a combination of personal income with the projected rental income of the SPV.

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