Owning a holiday home can be both a rewarding investment and also something tangible that you and your family can enjoy together.
Within property investment you are able to own a property in a few different ways:
- As an individual
- As multiple owners
- As a business or limited company
- As a Special Purpose Vehicle (SPV)
We are frequently asked about Holiday Let Mortgages for Limited Companies and we have helped a great many clients to secure their holiday home investment via this route.
However, it is not right for everyone.
Why do people buy properties through a limited company?
There is no simple answer to this question, people hold property within a company for all sorts of reasons.
These could include:
CREATING A PROPERTY BUSINESS
If you hold properties within a limited company then any unused profits could be put towards another property, helping to grow the portfolio in a tax efficient way. You may also be able to sell the company at some future point, as a holiday property portfolio business.
SEPARATION OF ASSETS
Holding property via a company will provide a degree of separation from other assets and liabilities.
There can be personal tax benefits for an SPV company to own your property, you must always verify this with an accountant. But one important principle of a limited company will always be possible. If the company makes a profit you do not have to receive this as inicome and therefore pay personal tax on it. The profit can be left within the company, a great tax planning opportunity.
It may be a useful part of inheritance tax planning, allowing future generations to benefit.
MAXIMISING TAX ALLOWANCES
Due to the Section 24 changes which mainly affected buy to let investments many property investors are now moving over to the SPV model. Residential buy to let landlords are no longer able to deduct their mortgage costs from their property income when calculating profits. They will instead receive a basic rate reduction from their income tax liability.
How are holiday let mortgages affected?
One of the great benefits of a holiday let property is that it has the opportunity to qualify as a Furnished Holiday Let (FHL). A FHL enjoys many tax breaks which are not available to buy to let investment properties.
One important break is the ability to fully offset your mortgage interest costs against the rental income, thus reducing your profits and the potential tax bill.
There is no requirement for you to own your property within a limited company or Special Purpose Vehicle (SPV) to make these deductions.
So if maximising your mortgage interest relief is top of your list you don’t necessarily need an SPV to accomplish this. As long as the holiday accommodation qualifies as a Furnished Holiday Let you will be able to deduct all of the interest charges.
When would I need a Limited Company holiday let mortgage?
If it is your intention to purchase a holiday home within an SPV Company then your mortgage will need to come from a lender that accepts applications from Special Purpose Vehicle Companies.
As an established broker in this market we have a number of choices available to borrowers.
What is a Special Purpose Vehicle?
An SPV, or Special Purpose Vehicle, is a generic name for a legal entity that is created for a narrowly defined purpose, as indicated by their SIC Code. Within property investment they are used for purchasing and holding residential buy to lets, holiday lets or for property development.
SPV’s are mostly set up as a private limited company but it could also be a Limited Liability Partnership (LLP), Public Limited Company (Plc) or other business types.
SPV is a term used within the mortgage and property world for sole purpose companies and therefore may not be a term that everyone recognises.read more about spv's Compare company formation packages
What mortgages are available?
There are a number of lenders accepting applications from SPV Companies so there is plenty of choice.
Generally the maximum loan to value is 75% and the loan will be calculated according to the holiday let rental income.
When applying for this type of mortgage the Limited Company/SPV is the mortgage applicant and the property owner.
Can I live in my holiday let?
One of the advantages of a furnished holiday let is that you are able use it for your own holidays. However, it is an investment property that cannot be permanently occupied.
Is Airbnb allowed?
Yes, we do have lenders for Airbnb mortgages, either through an SPV or in individual names.
Good to know
- Mortgages are available upto 75% LTV
- Personal guarantees will be taken from all Directors
- Newly created SPV’s are acceptable
- Layered company structure not usually accepted
- At least one Director needs to have a minimum income of £25,000pa
- SPV’s must be based in the UK
- Airbnb acceptable
How can we help
As a whole of market mortgage broker we have been providing detailed and specialist advice regarding holiday cottage mortgages since 2006.
During that time we have seen (and helped) more lenders enter this expanding market. Many lenders now better understand how Limited Companies fit with holiday let investing and are happy to consider applications from them, giving borrowers a lot more choice.
We are holiday let mortgage experts so please contact us with your ideas.
Frequently Asked Questions
What is a SIC Code?
The SIC code is part of the registration with Companies House and provides a description of your company’s type of business. You select the most appropriate codes that match the type of SPV business you are setting up.
What is a layered company?
A company is said to be layered when it is owned by another limited company. This sets up a group structure which is not favoured by lenders.
Are these commercial mortgages?
No, commercial mortgages are used by a business to purchase their own premises.
What is the maximum loan to value?
The maximum LTV is generally 75% of the property purchase price or valuation.
Can the mortgage be interest only?
Yes, mortgages for holiday lets can be arranged on an interest only basis.
How do you set up an SPV?
You can register a new Limited Company yourself to use as an SPV online for very little outlay but we would recommend seeking the advice of your accountant first.
Speak to an expert about HOLIDAY LET mortgages
We have been helping clients with their holiday lets since 2006 and our brokers have the widest possible experience in this sector. A holiday let mortgage will allow you to purchase a property that will be let out to paying holidaymakers, whilst also allowing you to personally use it as a holiday home each year.
Every one of our clients has a unique need and our brokers love a challenge. So, even if your situation is not ‘the norm’, we can usually help.
Call 020 8301 7930 to start your journey with us.