SPV Mortgage Guide

A Comprehensive Guide for UK Property Investors

The UK property investment landscape is constantly shifting, and SPV mortgages have become an increasingly popular choice for landlords and investors.

This guide aims to shed light on the world of SPV mortgages, their applications, and how they can benefit property investors in the UK.

What is an SPV Mortgage?

An SPV mortgage, also known as a limited company mortgage, is a type of loan specifically designed for properties owned by a Special Purpose Vehicle (SPV) Company.

It allows a limited company to borrow money to purchase or refinance an investment property, with the property itself serving as security for the loan.

Unlike other mortgages, which are taken out in an individual’s name, SPV mortgages are in the name of the limited company.

This means that the company owns the property, is responsible for the mortgage repayments, and the rental income generated is used to cover these costs.

What is an SPV?

SPV stands for Special Purpose Vehicle.

In the context of property investment, an SPV is a limited company set up specifically for the purpose of holding and managing property investments. This separation offers potential tax advantages, asset protection, and simplified portfolio management.

These companies are set up using specific SIC codes 68100, 68209, or 68320, which relate to buying, selling, and renting real estate.

Read more: Our guide to SPVs

SIC Code Explained

SIC stands for Standard Industrial Classification, and every company needs one.

A SIC code is a five-digit number used by the UK government to classify businesses according to their economic activities. These codes help identify and categorise the primary business of a company.

For property investment and SPV mortgages, the most relevant SIC codes are:

  • 68100: Buying and selling of own real estate
  • 68209: Other letting and operating of own or leased real estate
  • 68320: Management of real estate on a fee or contract basis

Why SIC Codes are Needed for SPV Mortgages

Lender Requirements: Mortgage lenders specialising in SPV mortgages require companies to have specific SIC codes. This ensures the company’s primary purpose aligns with property investment or management.

Business Focus: The correct SIC code demonstrates to lenders that the company is focused on property-related activities, rather than being a general trading company (which they don’t like).

Risk Assessment: Lenders use SIC codes to assess the risk associated with lending to a company. Property-focused SIC codes indicate that the company’s income will primarily come from property, which lenders can more easily evaluate.

Regulatory Compliance: Using the appropriate SIC code helps ensure compliance with legal and regulatory requirements for property investment companies.

Recent tax changes have made SPV ownership more attractive to most property investors.

From April 2025, the UK government plans to remove the Furnished Holiday Let (FHL) status, which will impact how mortgage interest can be offset against profits for holiday let properties held in personal names.

This change has prompted many more landlords to consider the SPV route to maintain tax efficiency.

Who Uses SPV Companies?

SPV companies are utilised by a wide range of property investors in the UK.

These include experienced landlords with extensive portfolios, as well as newcomers to the property investment market. Portfolio landlords often find SPVs particularly useful for managing multiple properties efficiently.

Many investors who previously held properties in their own names are now considering transferring their portfolios to SPV company structures.

This shift has been largely driven by changes in tax legislation and the potential benefits offered by limited company structures.

SPV Mortgage Options

Lenders offer a variety of mortgage products for SPV companies. These include:

Buy-to-let Mortgages

These are the most common type of SPV mortgage, designed for properties that will be rented out to tenants on assured shorthold tenancy agreements.

HMO Mortgages

For properties classified as Houses in Multiple Occupation, where individual rooms are rented to separate tenants.

more

Commercial Mortgages

Used for purchasing properties for business use, such as offices, factories or shops.

Semi-commercial

For properties that combine residential and commercial elements, such as a shop with a flat above.

more

Development Finance

Short-term lending for property renovation or development projects, which can include bridging loans.

Holiday Let Mortgages

A growing sector, mortgages are designed for properties that will be rented out on a short-term basis to guests.

How SPV Mortgages Differ from Non-SPV Options

While SPV mortgages serve similar purposes to their non-SPV counterparts, there are several key differences that investors should be aware of:

  • Higher interest rates (0.5% to 1% higher than individual buy-to-let rates)
  • Higher deposit requirements (often at least 25%)
  • More stringent lending criteria
  • Affordability assessments based on company finances
  • Higher fees

How do deposits work?

As mentioned, it is the company that:

  • Owns the property
  • Applies for the mortgage
  • Receives the rent

So it seems right the the company also pays the initial mortgage deposit, which will be at least 25% of the purchase price.

But how does this work?

The SPV must have it’s own bank account and the deposit funds should come from this account. There’s a few ways to get these funds together:

Director’s Loan

This is the most common method. Directors of the SPV can lend the company the deposit. This is usually documented as a formal loan agreement, with terms outlining the repayment schedule and interest rate (if any). Consult with an accountant to ensure this is done correctly.

Shareholder Equity

Shareholders can inject capital into the SPV by purchasing shares. This capital can then be used towards the deposit. This method might be suitable for investors with readily available cash who are willing to invest in the company’s equity.

External Loan

While less common, it’s possible to secure a loan from an external source, such as a family member or friend, to fund the deposit. Similar to a director’s loan, this should be formalised with a loan agreement.

Retained Profits

If the company has been running for a while then there may be some profits that have not been paid out yet. These ‘retained profits‘ can be used for all or some of the deposit.

Why Landlords Choose Limited Companies

The decision to use a limited company structure for property investment is often driven by several factors, with tax efficiency being a primary consideration.

Recent changes to mortgage interest tax relief have made individual property investments less attractive from a tax perspective.

Higher and additional rate taxpayers, in particular, may find that holding properties within a limited company structure allows them to offset mortgage interest against rental income more effectively.

All SPV’s can offset 100% of the mortgage interest payments against it’s rental income.

Limited companies pay corporation tax on their profits, which is currently lower than the higher and additional rates of income tax. This can result in significant tax savings, especially for larger portfolios.

Asset protection is another key benefit. By holding properties within a limited company, investors can potentially ring-fence their property assets from other business ventures or personal liabilities.

SPV structures can also make portfolio management more straightforward, particularly for those with multiple properties. They can simplify accounting processes and make it easier to reinvest profits into expanding the portfolio.

For investors thinking about the long term, SPV structures can facilitate smoother succession planning. Shares in the company can be transferred to family members over time, potentially reducing inheritance tax liabilities.

Disadvantages of Using an SPV

While there are numerous benefits to using an SPV, it’s important to consider the potential drawbacks:

Higher Mortgage Interest Rates

SPV mortgages typically come with interest rates that are 0.5% to 1% higher than those for individual mortgages. Over the lifetime of a mortgage, this difference can translate into thousands of pounds in additional interest payments.

Set-Up and Running Costs

Establishing and maintaining an SPV involves costs beyond those associated with purchasing a property. Factor in company formation fees, legal fees, and ongoing accountancy fees. These expenses can erode some of the potential financial benefits of an SPV structure.

Personal Guarantees

While SPVs offer limited liability in theory, many lenders require personal guarantees (PG’s) from the company’s directors. This means that if the SPV defaults on the mortgage, the directors will be held personally liable. Therefore, the asset protection offered by an SPV may not be absolute.

Stamp Duty Implications

Transferring existing properties into an SPV can trigger additional stamp duty charges. This is because the transfer is considered a purchase for tax purposes. Depending on the value of the property, this can add a significant upfront cost to using an SPV.

Complex Mortgage Applications

Applying for an SPV mortgage is a bit more involved. Lenders typically require additional documentation, such as the company’s financial records and business plan. This can lengthen the application process.

Restricted Mortgage Product Access

Some lenders offer exclusive mortgage products to individual buyers that may not be available to SPVs. This can limit your options and potentially lead to less favourable terms compared to what you could secure as an individual investor.

While these drawbacks are important considerations, they shouldn’t necessarily deter you from using an SPV. The potential tax benefits and other advantages can still outweigh the costs for many investors.

How a Mortgage Broker Can Help

Understanding SPV mortgages can be challenging, which is where a specialist mortgage broker can prove invaluable.

A broker with experience in this area can offer several benefits:

Access to Specialist Lenders

Many lenders offering SPV mortgages do not deal directly with the public, instead working exclusively through brokers. A good broker will have access to a wide range of these specialist lenders.

Understanding Complex Structures

An experienced broker can help investors understand the implications of different company structures and guide them towards the most suitable options for their circumstances.

Exploring Lending Criteria

Each lender has its own specific criteria for SPV mortgages. A broker can help investors comprehend these requirements and identify the lenders most likely to approve their application.

Effective Application Packaging

Brokers know how to present an application effectively, ensuring all necessary documentation is included and potentially speeding up the approval process.

Ongoing Support and Advice

A broker can provide valuable advice not just during the initial mortgage application, but also for remortgaging or expanding a property portfolio in the future.

Find Out More

Call us on 020 8301 7930 to see how we can help you get the right SPV Mortgage.

Setting Up an SPV

Establishing an SPV for property investment involves several steps:

  • Choose a company name and structure
  • Register the company with Companies House
  • Select the appropriate SIC code (68100, 68209, or 68320)
  • Appoint directors and shareholders
  • Set up a business bank account
  • Register for corporation tax

Investors should be prepared for the ongoing responsibilities of running a limited company, including filing annual accounts and tax returns.

Your accountant can help with this.

Read More: How to set up an SPV

Personal Guarantees and SPV Mortgages

In most cases, lenders require personal guarantees (PGs) from all directors when issuing SPV mortgages. This means that the directors, and sometimes shareholders, become personally liable for the mortgage debt if the limited company defaults on payments.

Why are Personal Guarantees Needed?

Lenders view SPVs as inherently riskier than individual borrowers due to the limited liability nature of companies. A personal guarantee acts as a safety net for the lender, ensuring they have recourse to the personal assets of the directors if the company’s assets are insufficient to cover the outstanding debt.

One advantage of PG’s is that it allows a brand new SPV, with no assets or trading history, to apply for a mortgage.

Signing a personal guarantee can have significant consequences for the individuals involved. If the SPV company fails to meet its mortgage obligations, the lender can pursue the guarantors for the outstanding balance and costs. This can lead to the seizure of personal assets, such as savings, investments, other property etc.

Are There Exceptions?

While most lenders require personal guarantees, there are some exceptions.

Certain lenders may be willing to waive the requirement for low loan-to-value (LTV) mortgages, where the property’s value far exceeds the loan amount. However, these deals are less common and often come with other restrictions.

SPV mortgages offer a flexible and potentially tax-efficient way for UK property investors to build and manage their portfolios. While they come with additional complexities and costs compared to individual mortgages, the overall benefits can be significant.

However, the decision to use an SPV structure should not be taken lightly. It’s essential to seek professional advice from mortgage brokers, accountants, and tax advisers to ensure this approach is suitable for you.

As the UK property market continues to evolve, SPV mortgages will remain an important tool for investors.

Got questions?

For any additional questions concerning limited company mortgages, please give us a call on 020 8301 7930.

Yes, but this may trigger stamp duty and potential capital gains tax liabilities. Seek professional advice before proceeding.

Typically, yes. Most lenders require personal guarantees from all directors with a significant shareholding.

No, SPV structures are generally only suitable for investment properties, not for your main residence.

There’s no legal limit, but some lenders may have restrictions. It’s often advisable to spread larger portfolios across multiple SPVs.

Yes.

No. In the main lenders require the company to be an SPV. Exceptions can be made where the company is buying its trading premises with a commercial mortgage.

Read more: What’s the Difference Between an SPV and a Limited Company?

Yes. An SPV is simply a limited company. So you can have as many as you need.

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Kerry and Dawn were absolutely brilliant from start to finish for our first Time buy recently. As newbies we had a lot of questions which were responded to very quickly and clearly. Service was outstanding and I can't reccomend enough. Thank you!

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Kerry has been an invaluable resource for us not once, but twice over the past five years, assisting us with both our initial mortgage and subsequent remortgage. Kerry's expertise and knowledge are truly commendable.

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