BTL or Commercial Mortgage?

THE QUESTION

I'm looking at a HMO for my next project but would like to put this one into a new limited company. How easy\difficult is to get a mortgage on a limited company without any trading history

What are the perils and pitfalls of using brand new limited companies for lending? Is it possible?

THE ANSWER

Mainstream BTL lenders do not lend to limited companies or SPVs regardless of how young or old they are. If you want a 'vanilla' BTL mortgage you have to apply as an individual.

If you want to borrow in the name of a limited company, then you will need to go to commercial lenders, or what I would refer to as specialist lenders; those on the periphery of BTL lending.

Trading history, accounts etc. are less relevant if the property you are putting up as security has a provable, consistent income that reassures the lender that you have the ability to service the mortgage payments. So, if you can show a fully let property, with ASTs as the proof of sustainable income, that overrides the lack of a trading history.

I have often arranged such mortgages for startup limited companies.

Where it gets more problematic is when the income is transient in the form of any short-term lets i.e. B&Bs, serviced apartments, holiday lets, even hotels.  Now trading history is important, as are historical occupancy rates, because the lender has to use different criteria to establish serviceability of the mortgage.

The one thing you can be sure of is that commercial lenders are sloooow; significantly slower than BTL lenders. From applying to the money being released will take,on average, three months.

I had a commercial lending enquiry last year. During the discussion I warned the borrower that it would take three months plus to complete. He thought that was way too long and needed it quicker. As I believe in being upfront and not lying just so I get the business, I reaffirmed that is how long commercial mortgages take. We spoke a few days later and he told me he was going to use another broker who told him it could be done in six weeks. Coincidentally I bumped into the same guy some months later at a networking meeting and I asked him "Did you get that mortgage in six weeks?"

"No," he said, "It took three months, just like you said it would."

Finding a broker that is conversant with all of the above is not straightforward. The majority of mortgage brokers are also 'vanilla', handling mostly main res and some BTL mortgages. Certainly any of those parked in an estate agents office will be. For specialist needs you should deal with a broker that understands the commercial lending market.

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