Be clear on limited company buy to let mortgage liabilities!

There is a lot of false information in the public domain about investing in property via a limited company, and the associated financial liability.

Make sure you are clear on what is involved. The ring-fencing of financial liability from a legal standpoint is different to the reality of investing via a mortgage and the requirements of a limited company buy to let mortgage lender.

As a specialist buy to let broker, we explain exactly where lenders stand on this

Don’t get caught out. We often have clients who are not aware of a critical requirement from lenders around financial liability and it scuppers their plans if they are un-prepared or unwilling to face the reality of what is involved.

Watch our video guide to ensure you are fully clued-up.

Video guide transcript: A common misconception about limited company buy to let mortgage investment

"One common misconception about investing in property via a limited company is that the financial liability is ring-fenced to the company.

“As a specialist broker, we work with over 80 lenders in the marketplace and there's not one that doesn't ask for personal guarantees on the mortgage. 

“That means that, as director on the mortgage, or directors on the mortgage, you will be personally responsible for the repayment of the mortgage, if the limited company fails. 

“A lot of people aren't aware of that, and when they come to apply are a little bit worried about putting personal guarantees in place. But, you need to be aware that that is going to be a requirement of lenders in the marketplace when you're investing via a limited company. 
“It's not something to be particularly scared of, it's just the same as if you took out a mortgage yourself and were personally responsible for it, but it is something you need to know when you're investing in a limited company.

“And, if you are, do give us a call whether you are remortgaging or purchasing, we’d be delighted to help”

Personal guarantees on a mortgage have to be arranged by a solicitor who is independent to the transaction and who represent you as an individual, rather than representing the lender or your limited company. This is in order to avoid any conflict of interest. The solicitor will describe to you the implications of taking financial responsibility for the mortgage in the event your limited company is unable to cover the costs.

A personal guarantee is a legal document that you will sign and will be counter signed by the solicitor who discusses it with you.

Lenders and their solicitors have rules around how the personal guarantee can be put in place. It may be possible to speak to a colleague of the solicitor working for your limited company, or to handle the personal guarantee by speaking to a solicitor remotely via live video. Otherwise you will need make arrangements with a legal firm yourself.