How to get a mortgage through a limited company? In the United Kingdom, you have a choice of getting an individual mortgage or getting one with other partners. That depends on whether you can pay the mortgage alone or with partners. After getting a mortgage, you must keep paying the instalments on time for 25 years. The tenure of instalments may vary from company to company. The property you are paying the mortgage for is not yours until the full amount is paid, and the company can retake the property in case of irregular instalments. Let us carry on reading to learn more about how to get a mortgage through a limited company in the UK.

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How to Get a Mortgage through a Limited Company in the UK?

How to get a mortgage through a limited company? A mortgage is a loan provided by banks or any building firm that enables you to buy a property or land in the UK. This also implies that the bank or loan lending authority has the right to take and sell the property if you are unable to keep up with the instalment plan chosen by you.

What is the Difference Between a Loan and a Mortgage?

A loan is the amount of money lent by the lender to the borrower, and both agree on a set period during which the borrower will return the amount along with interest if imposed by the lender. However, the mortgage, on the other hand, is the amount of money against a piece of property. You must clear the dues to own the property completely.

1- The mortgage deposits

In the case of the mortgagee, it is the down payment that is deposited at the start of the mortgage procedure. After depositing an initial amount, you will pay the instalments over the due deadlines. A down payment or deposit is a certain percentage of the property you are buying; for example, if you are buying a property worth £200,000. You must deposit 10% as a down payment, which is £20,000.

2- Finding a mortgage

In the UK, there are firms, companies, and banks that offer mortgages. However, there are two basic ways of finding a mortgage.

1. Direct: You can find a direct mortgage source based on your findings and sources.
2. A Broker: You can get help from a broker or a financial adviser. They usually have offers, or they can arrange a mortgage for you in your desired area.

How to Get a Buy-to-Let Mortgage for a Limited Company?

Getting a buy-to-let mortgage through a limited company is the same as getting mortgages from a broker. The steps are the same. You must decide what you need. You then search for your options and finalise your criteria. The next step is putting up an application and providing all the required documents to the lender. The mortgage company calculates the worth of the property, the company finalises the amount, and the mortgage process is completed. As explained above, when searching for property of your choice, you can search yourself, take help from your friends, or hire a broker to help you in this regard.

How to Invest in Property via a Limited Company?

The primary step in mortgaging is deciding whether to invest as an individual or do it via a limited company. This became a point of consideration when the taxation laws over time were changed by the UK

government, imposing more income tax returns on individuals. The new tax laws imposed that a tax amount is paid on the full value of the mortgage rather than the profit earned; in other words, a 20% tax is charged to the owner.

Investing in property through a limited company may be a suitable option for landowners, keeping in mind all the taxation procedures. The landowners may find it more valuable rather than buying a property as an individual because that would impose more income tax returns. The new tax laws impose a tax on the landowner on the full year’s rental income rather than just the profit gained over the mortgage.

It is different for every person depending on their income and the value of the mortgage they are dealing with. In this case, it is better to get advice from a mortgage advisor. A mortgage advisor draws a clear sketch of your income and the value of the mortgage and suggests a more appropriate way to deal with taxation charges. This will help you understand whether it is better to invest in a person or through a mortgage-limited company.

What are the Costs When Buying through a Limited Company?

Obviously, when you are dealing with property as an individual, there are no additional costs other than tax imposed by the United Kingdom government. However, when you are involving a company, they have their decorum of dealing with each case, and at each step, they charge a certain fee for their services. The following factors are involved when buying through a limited company.

1- Tax advice

A mortgage advisor will do this. He will explain your finances to you and help you decide whether it is right for you to opt for a limited company.

2- Legal advice

Legal advice is a crucial step on how to set up a limited company for mortgage purposes.

3- Registration costs

This is the amount you must pay to register the limited company on the main website of the company.

4- Tax accounting

You may need to avail of tax accounting services from the company to manage your accounting affairs along with tax calculations.

5- Conveyancing fee

This is the amount of money you must pay while completing all the legal work of the mortgage transfer process.

6- Land tax/Stamp duty

This is the tax imposed by the government on the property you are buying. A 5% surcharge in the United Kingdom is applicable on all property purchases made by the limited company. For calculating the stamp duty, you can take help from a stamp duty calculator.

7- Agent fee

This will only apply if you hire an agent to deal with the limited company on your behalf. The agent will be responsible for all the work from hiring a tenant to completing the property purchase.

Why is the Deposit Needed?

As mentioned earlier, you need to make a down payment as an initial deposit, which is a certain percentage of the total property value. Usually, you must make an initial deposit at the time of making a deal with the limited company. You can always increase the deposit amount; it will benefit you in the long run in the form of fewer instalments or a lower interest rate. However, there are times when companies do not offer you a loan-to-value amount.

This happens when there is a risk that property prices might drop sooner. For example, if you are provided with an 85% loan-to-value amount, and after a brief time your property price drops, this makes your equity negative, and you have to pay more than the recent property value. Well, luck is a factor in such matters.

The Bottom Line

In conclusion, investing in property by involving a limited company has its own benefits and drawbacks as well. If you can afford charges in every step of property matters, dealing with a limited company is a good option. If your tax return amount is not heavy, you can directly deal with mortgage matters. You can also get in touch with one of our professionals to learn more about how to get a mortgage through a limited company in the UK.

Reach out to our intelligent and clever-minded guys to get the answer to your queries in the UK, we will get to your answers quickly. We will help to decide how to deal with your tax implications.

Disclaimer: The general information provided in this blog about how to get a mortgage through a limited company includes text and graphics. It does not intend to disregard any of the professional advice in the future as well.