Limited Company Underwriting
Mortgage lenders have basic requirements. They need to be satisfied with these to enable them to offer the mortgage. There are many misconceptions as to how in-depth these requirements are. For instance, some lenders are now lending to First Time Buyers. These people may also be First Time landlords. Previously, however, you needed to be a homeowner.
Below are the basics of Limited Company Buy To Let Underwriting requirements
To be UK based and over the age of 21. This varies slightly in that specialist lenders may look at 18+ and others may consider Expats/Foreign nationals. For mainstream lenders, however, UK ruling applies. The maximum age for many is 75, but again, various lenders have different approaches to this. Age 80/85 or higher can be achieved.
Need to be individuals, not companies. i.e. if you set up an SPV, Limited company lenders expect the shareholders and directors to match and be people. They should not take a layered approach. This is where one company will own 100% shares in the SPV, for example (this is still solvable if but not completely standard).
Some form of provable, UK-based income. £25k is the minimum for some lenders. Others will be fine if you can prove your income, regardless of its value. Income can come from property, pension, employment, or self-employment. – The source of your income will determine your lending options.
The simplest form is a directors loan into the company from accumulated personal funds. Anything different to this, such as an intercompany loan, gifted deposit, or monies from overseas should be checked with Hawke first.
Types to look out for which may restrict lending options are:-
- Above commercial – For example, a flat above a takeaway. The Mortage Provider would still able to lend, but the loan to value (LTV) could be restricted. This would be dependent on the surveyor’s comments.
- High-rise blocks of flats – This varies greatly from lender to lender. Generally, anything over six storeys should be checked. In London, this tends to be more flexible.
- New builds – These can be unusual cases as new builds are usually considered a safe bet. Some lenders, however, are cautious of these. This is due to potentially inflated prices and a number of properties coming onto the market all at the same time, which can affect demand.
- Ex-local authority properties – These are excluded by some lenders.
- Short leases – Any properties with leases on or around the 70-year mark can be deemed too short. This is due to the fact that lease length has the potential to affect the resale value in years to come. This, therefore, in turn, affects the security of the lender.
- Holiday lets – These are extremely limited in their lending options.
- Properties with large acreage – farms, or those with restricted use.
- Property value – Those under £60k or more than £2m take you outside of the normal lending bracket.
The number of properties, amount of borrowing, and rent received could determine which lenders will assist. Since the PRA changes, anyone with 4 or more mortgaged properties will be deemed a portfolio landlord. Therefore, an assessment of your portfolio will be required.
All of the above will shape which lender and which product is most suitable for your circumstances. At Hawke, we are happy to carry out a full assessment. We can take your application from start to finish without charging a broker fee. This includes Limited company applications.