Limited company mortgage how it works, eligibility and costs

A limited company mortgage is a mortgage taken out by a company rather than by you personally, with the company named on the mortgage offer and the property title. There are two very different reasons someone ends up looking for one, and it's worth being clear which one applies to you before reading further.

The first is buying a residential property to let out, using a company set up purely to hold property, known as a Special Purpose Vehicle or SPV. This is by far the more common use of the phrase, and it's the route most landlords are researching when they search for a limited company mortgage. The second, much less written about, is a trading business buying the office, shop, workshop or unit it already operates from, rather than continuing to rent it. This guide covers both, with the SPV section summarising the key points and linking to our full buy-to-let limited company (SPV) mortgage guide for the complete detail on that route.

Whichever path applies to you, one thing is consistent: lenders view a company as a separate legal entity with no personal credit history of its own, so directors are almost always asked to provide a personal guarantee. That guarantee ties the mortgage back to you personally, so it's worth understanding the risk. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

Before going further, it helps to see the two routes side by side. They're assessed differently, need different company structures, and typically come with different deposit expectations.

If you're buying to let, the next section gives a short summary and links to our full SPV guide. If you're a business owner buying the premises you trade from, skip ahead to the trading business section below, which is where this guide goes into the most depth.

Buying to let through a limited company usually means setting up an SPV: a company created solely to buy, hold and let residential property, registered at Companies House under an appropriate SIC code. Deposit requirements typically sit around 20-25% of the property value, and rental income needs to cover the mortgage payment by a healthy margin, commonly assessed using an interest coverage ratio (ICR) somewhere in the region of 125-145%, calculated against a stressed interest rate rather than the pay rate on the mortgage. This kind of stress testing follows the underwriting standards set out for lenders by the Prudential Regulation Authority. Exact figures vary by lender and by your personal tax position, so it's worth speaking to an advisor for current numbers rather than relying on a fixed rule of thumb.

Landlords typically choose this route to manage mortgage interest tax treatment more efficiently across a growing portfolio, since a limited company can deduct mortgage interest in full as a business expense, unlike personal ownership where relief is restricted under Section 24. It isn't automatically the right answer for everyone, though - setup and running costs, a smaller panel of lenders, and the need to extract profit through salary or dividends can outweigh the tax benefit for a single property held by a basic-rate taxpayer.

If you already hold four or more mortgaged properties across your personal name and any companies you control, lenders classify you as a portfolio landlord and apply extra affordability checks across your whole portfolio rather than just the property you're buying. See our portfolio landlord mortgages guide if that applies to you.

This section only summarises the key points. For the complete picture, including Section 24 tax treatment, SIC codes, stamp duty and dividend extraction, see our buy-to-let limited company (SPV) mortgage guide.

The less-discussed use of a limited company mortgage is a trading business buying the premises it already operates from - an office, retail unit, workshop or industrial unit - rather than continuing to pay rent to a landlord. This is a genuinely different lending decision to an SPV purchase, and it's assessed on completely different criteria.

Where an SPV mortgage lives or dies on rental income, a trading business mortgage is assessed on the business itself: its trading accounts, profitability, and cash flow over recent years. Lenders want to see that the business can comfortably cover the mortgage payment alongside its normal running costs, not just on paper but through cycles of stronger and weaker trading.

Most lenders want at least two years of trading history before considering an application, since a track record of profit and cash flow gives them something concrete to underwrite against. Very new businesses aren't automatically ruled out, but a lender will typically want a well-researched business plan and financial projections to stand in for the trading history they'd normally rely on, and appetite varies significantly by lender and sector.

As with an SPV, directors are still expected to provide a personal guarantee in almost all cases, since the company itself is rarely considered strong enough collateral on its own. Deposit requirements and lender appetite vary more here than for buy-to-let, depending heavily on the sector the business operates in and how established it is.

A few things strengthen a trading business mortgage application:

• Two or more years of profitable, consistently prepared accounts
• A clear, well-documented business plan if the company is newer or the purchase supports expansion
• Evidence that the premises suits the business long-term, rather than being a speculative purchase
• Directors with a clean personal credit history, or a clear explanation where it isn't
• A realistic deposit reflecting the sector - some trading sectors are viewed more cautiously by lenders than others

If your business is weighing up buying versus continuing to rent, our commercial mortgages guide covers the owner-occupier versus investment decision in more depth. And if what you actually need is funding for equipment, stock or working capital rather than buying premises outright, a business loan may suit better than a mortgage.

Eligibility criteria differ depending on which route you're applying for, though a few requirements are common to both: an appropriately structured company, at least one director willing to provide a personal guarantee, and a credit history a lender is comfortable with. If you're unsure how your circumstances measure up, free and impartial guidance is available from MoneyHelper (0800 138 7777), alongside speaking to an advisor about your specific situation.

For a buy-to-let (SPV) limited company mortgage, deposit requirements typically sit around 20-25% of the property value, broadly in line with personal-name buy-to-let lending. For a trading business buying its own commercial premises, deposit requirements are often higher and more variable, depending heavily on the sector the business operates in and how established it is.

As an illustrative example only: on a £300,000 SPV property purchase at a 25% deposit, that works out at £75,000 in cash. A trading business buying £300,000 premises might be asked for a higher deposit depending on its sector and trading history - this figure isn't a quote or a guarantee, and your own deposit will depend on the lender, the property and your circumstances.

Having the right documents ready before you apply for a limited company mortgage can shave real time off the process. The exact list varies slightly between an SPV and a trading company application, but most lenders ask for a combination of the following.

A limited company mortgage follows a broadly similar process to a personal mortgage application, with extra steps around the company itself. From first enquiry to completion, a straightforward application typically takes several weeks, though trading business applications with more complex underwriting can take longer.

Alongside the mortgage itself, a limited company mortgage - whether an SPV or a trading business purchase - typically involves several categories of cost. A rate premium over an equivalent personal-name mortgage is common, since fewer lenders offer limited company products and underwriting is more involved, though the size of that premium varies by lender and structure, so it's worth comparing options rather than assuming the worst.

Stamp Duty Land Tax also applies to company purchases in the same way as personal ones, usually including the 3% surcharge for additional dwellings on residential purchases. Current thresholds and rates are set out on the government's Stamp Duty Land Tax page, and it's worth checking the up-to-date position with your solicitor before you exchange, since these figures do change.

If you already own your premises outright and want to release capital for expansion rather than fund a new purchase, our remortgaging explained guide covers how that works separately from a new-purchase mortgage.

It's more bespoke underwriting than a personal mortgage, but it isn't out of reach. Fewer lenders offer limited company mortgages than personal ones, and the assessment goes deeper into the company's structure, the directors' credit history, and either rental income or trading accounts depending on the route. Comparing a wide range of lenders significantly widens realistic options, including for directors who've had past credit issues. Speak to an advisor for guidance on which lenders might suit your circumstances.

If a director has a County Court Judgment, default or past bankruptcy, it's worth looking specifically at adverse credit mortgages alongside your limited company options, since specialist lenders in one area often overlap with the other. As always, your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it, so it's worth being realistic about affordability on either route before you commit.