Introduction
Investing in buy-to-let properties through a Special Purpose Vehicle (SPV) Limited Company has become increasingly popular among landlords. With the proper structure, SPV ownership can offer tax efficiencies, limited liability protection, and access to specialised mortgage products. This guide explores the key criteria, mortgage requirements, and best practices for landlords considering this investment route.
What is an SPV Limited Company?
An SPV (Special Purpose Vehicle) is a limited liability company established solely for buying, selling, and letting properties. Lenders typically require that the SPV be registered with specific Standard Industrial Classification (SIC) codes related to property ownership and management. Acceptable SIC codes include:
- 68100 - Buying and selling of own real estate
- 68201 - Renting and operating of Housing Association real estate
- 68209 - Other letting and operating of own or leased real estate
- 68320 - Management of real estate on a fee or contract basis
Only SPVs registered in England, Wales, or Scotland are eligible. Partnerships and LLPs are not accepted, and commercial assets within the SPV are typically not allowed.
Key Criteria for a Limited Company Buy-to-Let Mortgage
To secure a mortgage through an SPV, landlords must meet the following criteria:
- The SPV must be set up from day one for property transactions.
- A floating charge over the company's assets is not required.
- Personal guarantees from all directors are mandatory.
- The company’s Direct Debit payment must match the Limited Company name.
- All guarantors must seek Independent Legal Advice before signing the Deed of Guarantee.
Acceptable Sources of Deposit
When purchasing a property through a Special Purpose Vehicle (SPV), lenders require a clear and acceptable source of deposit funding. These can include:
1. Intercompany Loans
SPVs may receive deposits from a connected UK company under these conditions:
- The donor company must have identical directors/shareholders to the SPV.
- The donor company must have been actively trading for at least 12 months with filed accounts.
- Loan terms must meet HMRC’s ‘Actual Official Rate’ and be documented.
2. Gifted Deposits
Lenders accept gifted deposits from individuals, but not directly to the company, and not from directors. Gifts of equity are also permitted if the director is selling their property to their SPV.
3. Overseas Funds & Business Loans
- Overseas funds may be acceptable if an audit trail is provided.
- Bounce Back Loans (BBLs) are not accepted as deposit sources.
Purchasing a Director’s Main Residence
An SPV may purchase a director’s principal residence for buy-to-let purposes, subject to:
- A simultaneous purchase of a new residential home.
- The director moved out upon completion and provided a new address.
- Proof of the onward residential mortgage offer.
Company Structure Requirements
To qualify for a limited company buy-to-let mortgage, SPVs must adhere to strict structural requirements:
- A maximum of two directors/shareholders who must own 100% of the company.
- All directors must meet standard lending criteria.
- A Person of Significant Control (PSC) must match Companies House records.
- Only one SPV per director is allowed with a given lender.
Portfolio Landlords
Lenders classify applicants as portfolio landlords if they own four or more mortgaged properties across personal and company portfolios. Additional criteria apply, such as stress testing on all properties.
Application Process & Pre-Checks
Before applying for an SPV buy-to-let mortgage, applicants should ensure their Companies House records are up to date. Key considerations include:
- Checking SIC codes and shareholder details.
- Ensuring PSC data matches lender records.
- Waiting three days after company formation before applying.
If Companies House information is incorrect, it must be updated before reapplying.
Mortgage Product & Loan Criteria
SPV buy-to-let mortgages typically feature:
- Loan-to-Value (LTV) up to 80%
- Loan amounts up to £1.5 million
- Interest Cover Ratio (ICR) of 125%
- First-time landlords accepted (subject to standard criteria)
Underwriting & Documentation Requirements
Lenders require a range of documents before approving an SPV mortgage, including:
- Proof of deposit
- Three months' bank statements for all directors
- SPV company bank statements (at least three months’ worth)
- Certified identification if directors have not met the lender in person
Additional documents, such as a property schedule, may also be required.
Company Changes & Restrictions
Lenders impose strict restrictions on changes to an SPV post-mortgage approval:
- Any changes to directors or shareholders require lender consent.
- SPVs cannot restructure into layered companies, trusts, or offshore entities.
- Companies cannot have more than two directors/shareholders.
Failure to comply may result in legal action or forced mortgage redemption.
Final Thoughts
Buying a buy-to-let property through an SPV Limited Company offers significant advantages, including tax efficiencies and limited liability protection. However, lenders impose strict eligibility criteria, from company structure to funding sources.
Landlords should seek professional mortgage and tax advice to ensure compliance and maximise the benefits of investing through an SPV. By understanding the lender’s requirements and preparing the necessary documentation, investors can streamline their mortgage applications and secure competitive financing for their buy-to-let portfolios.
