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Category: limited company mortgage guides

If you hold all of your buy to let mortgages in a limited company structure, it is vital you don’t make a simple mistake, which could lead to the lender calling in the loan.

 

Video guide transcript: Watch this guide before changing your limited company structure!

“If you're thinking about changing the structure of an existing company that you already have in place after you have completed on a mortgage (so mid-mortgage term) that is definitely something that is doable, but not every lender will be able to accept it.

“That is something you do have to bear in mind if you’re looking to add another director, or shareholder, or remove one of them, some lenders may actually decide to re-call the loan if you do this mid-term [of the mortgage] when they find out you have done so.

“So please, please, please, always make sure you do speak to them before you go ahead with making those changes and then they’ll advise you whether it is something that they can support, or not.

If it isn't something they can support and you still want to move forward and make changes, the only option that you are going to have is to remortgage away from your existing lender.

You would need to go ahead and find a product with a new lender in the market, who would be able to accept the new company structure.

If that is the case, then give us a call and we will be able to secure a product with a new lender for you.”

Why do lenders prefer you not to make changes to a limited company mid-term?

Lenders dislike structural changes to a limited company mid-mortgage term, because it changes the risk profile of the borrower, after the loan has already been agreed. When they underwrite a mortgage, they’re assessing a very specific entity with a fixed structure. If that changes later, their original assessment may no longer hold.

Here’s what’s going on under the surface:

1. They approved the loan based on a specific set of directors/shareholders

If you change directors or bring in new shareholders, the people controlling the company—and therefore the decision-makers and risk—have changed. Lenders don’t want to end up lending to someone they never assessed.

2. Anti-fraud and anti-money laundering concerns

Sudden changes in ownership of a mortgaged company can raise red flags. Lenders want predictable, transparent ownership, throughout the loan term.

3. Personal guarantees become invalid or incomplete

If the original directors gave personal guarantees, adding or removing directors/shareholders affects the lender’s security. A new structure could leave the lender exposed.

4. They priced the mortgage based on the original structure

If the company changes its trading activity, SIC code, or purpose, the risk category might shift. The lender may no longer consider the business eligible for that product.

5. It can make repossession or legal processes more complicated

A stable company structure keeps the lender’s legal rights clean and enforceable. Significant changes can create legal friction.

6. They don’t want the company to become a “vehicle for transfer”

Some lenders worry the borrower could effectively “sell” the company (and therefore the property) without repaying the mortgage by transferring shares—this is known as sub-sale via shares. Preventing mid-term structural changes limits that loophole.