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I know, this is a question for a mortgage advisor but I want a poke around before suffering the incessant sales calls.
Regular viewers will know the wife and I are currently undergoing a renovation project. We are looking to extending in the next 5 years (two storey wrap around).
However, thy covets thy neighbour's house. Which has just come on the market in a sorry state (full reno, again), for less than I was expecting. I want it. The wife said I can have it, through gritted teeth. It would be bought with a view to either knocking both down and building one OR to avoid the inevitable objection against the planning for our wrap around which will be closest to their boundary. If the latter, then it would just go back on the market after the extension planning is granted, maybe less a little garden land.
Question is, I'd rather park something like that in my limited company which has JUST gone into its second year. Mortgage would be circa 2 x year 1 pre-tax profit. If it matters, I would not be letting it out at any point so BTL mortgages seem redundant.
Is my company too young to get a mortgage or is it all dependent on me, the man behind the curtain?
Cheers
I’m not sure you can get a mortgage on a personal property through a Limited Company. It would be different if you were buying it as a developer to sell on.
Maybe not exactly the answer to the question you are asking, but being a company director on a technically low salary (+dividends), we have a mortgage with Virgin, who will take into account company profit, rather than your earnings
I don’t know why you would do that. As a property developer and a limited company owner, we only mortgage properties related to our company. When I first started using the limited company for mortgages it wasn’t easy, I had to fund 100% of the land purchase and then 40% of the build. After 6 months the bank would then let me remortgage where I could recoup my costs. But that was on the proviso of the properties being developed to a certain % and estate agents providing sale and rental projections. (This was for a build of a block of apartments, clearly not residential and we only planned on renting them out)
And just thinking back now, we had a bit of trouble as my company used to set up the business was a retail company, had capital and plenty of years trading, but because it wasn’t a commercial property or building related company the banks were quite difficult. A few years later things are much easier. We went direct to banks we trade with rather than an independent mortgage advisor. We’ve since opened a limited company for the development projects and as we now have trading history in the building and development space, mortgages are a lot easier to come by. We didn’t want to shop around to much for mortgages, we own a fair amount of companies and we’re very keen to keep partnering with our banks we currently use. You may have better look than we did at the outset.
I also have personal mortgages, but these are in no way linked to my limited company.
Ive never purchased houses/land via my ltd co. The reason given was - from my accountant - was although its good to be able to use ltd co funds to purchase, you can pay tax twice. Once going into the ltd, then again transferring it from the ltd to yourself personally down the line (CGT/Stamp Duty).
As to getting a mortgage on it (i dont have experience of getting ltd co mortgage) - if your planning on knocking it down, wouldnt the mortgage company be a bit upset as that is their security.
Id try to buy it personally by either a second mortgage or releasing equity on your property and take out/use retained funds in ltd (as much as you could). Plenty lenders who deal with even not long trading ltd company directors.
Sounds like op wants to buy a house he can’t afford
If it's short term bridging loan. You need a solid plan though, not might do this might do that.
Maybe help, maybe not...
https://www.contractoruk.com/limited_companies/can_i_buy_property_my_limited_company.html
https://www.contractoruk.com/limited_companies/can_my_limited_company_help_me_buy_house.html
https://www.contractorcalculator.co.uk/property_investments_contractors.aspx
I needed 2 years of accounts to get a contractor mortgage.
Sounds like a lot of hassle just to force through planning, there aren’t actually that many reasons for genuine objection. But sounds like the real reason is:
maybe less a little garden land.
Be very wary of the 'knock two down to build one' idea. Not looked upon kindly by some planners (which makes sense really). This is one for pro advice first I think.
Does seem a bit extreme, buying next door so you can build your extension and then trying to use a ltd company - presumably to dodge the second home extra stamp duty? Or am I'm widely misreading?
If you have that much money I'd just be looking to buy another property that meets your requirements...extensions are a pain in the ass all round.
presumably to dodge the second home extra stamp duty?
Ltd company pays the same stamp duty
Directors Loan account?
I was referring to the 'second home' stamp duty uplift. Not basic stamp duty. Get round it by having one property personally held, and one held by the ltd company.
From gov.uk:
Higher rates for additional properties
You’ll usually have to pay 3% on top of SDLT rates if buying a new residential property means you’ll own more than one.
So I am. There is no savings for a ltd company. They pay the same as a second home
yes, I know that if they declare an interest. I'm saying the OP might be thinking its a way to avoid it.
There is some useful stuff on this link about the benefits of buying through a ltd company - somewhere near the bottom is a Stamp duty example. I am not a tax expert. was something I was looking into a while back
Property Developers | Stamp Duty | SDLT (optimiseaccountants.co.uk)
Some clarity that I avoided because my original post became a little rambly.
No attempt to avoid SDLT; as someone else has pointed out, company's pay the 3% surcharge in any event. Although if there is a relief that I am not aware of, I would use it.
It will be purchased day 1 as a reno project but not a quick turnaround as we're busy with our current project. The renovation won't start for 48 months. There will be no mortgage by the time wrecking balls and/or paint brushes start swinging. It's just a short window of opportunity that I will need to utilise borrowing as cash is otherwise tied up in my current project. So some of you are quite right, I can't afford it right now.
What it is about however, is the tax treatment of costs, profits and mortgage interest that I want to deal with in an efficient manner.
What it is about however, is the tax treatment of costs, profits and mortgage interest that I want to deal with in an efficient manner.
careful saying that around here, efficient tax planning is not liked 😂
What it is about however, is the tax treatment of costs, profits and mortgage interest that I want to deal with in an efficient manner.
you've have to sell the finished product back to yourself to live in it though, at the market rate, incurring stamp duty a second time, VAT on all the value your company has added, tax on the profits that your company makes.
I doubt this would be tax efficient even if it is legal. lets say you buy for £200k spend 50k instead of 65k (20% saving on vat, 5k saving on mortgage interest taken pre-tax), and its now worth £300k.
you pay tax on
3% of £200k for stamp duty first time round (£6k)
£2500 on stamp duty the second time around
£20k(ish) on vat (I think)
£12k (ish) on tax on the £30k profit your company how now made
sums are very rough, but it doesn't look like the £40k spend on tax here is better than the £15k you saved going the proper route?