How much deposit do I need for a buy to let limited company mortgage?

Categories: limited company | guides | buy to let mortgage guides

You can get a buy to let limited company mortgage, with a deposit that is 15%-20% or more of the value of the property you are buying.

You can even borrow 100% of the property value, more on this below.

You might ask why you would put more than 15%/20% down as a deposit if you don’t have to, after all, property is one of the most expensive things you will ever buy, so being able to buy one at a lower cost to you makes sense, right?

The answer to that question is – not necessarily. Read on to find out more.

Why put down more than 15%-20% deposit on a buy to let Ltd. company mortgage?

You might have no option than to put down just 15%-20% of the property value, when you are investing in a property. In which case, being able to get a mortgage through your limited company at all might be drive your decision making. But, if you can raise a bigger deposit, there can be advantages. 

Availability of high LTV buy to let mortgages on a limited company mortgage

Bear in mind though that not all lenders offer 80-85% loan to value (LTV) deals. In fact, very few do.

There have even been points in time when lenders have completely stopped offering this loan to value, which is always a possibility if property values are expected to drop. 

Imagine if you took out an 85% loan to value buy to let mortgage, but soon after the value of your property dropped. This could put your property into negative equity, where you (or if you are investing via a limited company, your company) owe more money on your mortgage than the property is worth.

This is bad news for you, but it is certainly a position a lender does not want to be in. This is because if you fail to keep up with mortgage payments the lender’s back up plan is to take back your property from you (repossess) and sell it to recoup their debt.

Where your property is not worth what was paid for it, they won’t be able to cover the debt by selling the property.

This risk is also why many lenders don’t offer high LTV mortgage deals.

Mortgage interest rates at high LTVs

Where a lender is taking on a large proportion of the risk in a mortgage deal, they logically have to lessen that risk in some way. That is the nature of business.

What a lender will do to ease the risk of lending your company most of the value of the property you are buying is to charge you a higher interest rate, so that each month you will pay them more money than if you were borrowing the same amount of money, but had put down a bigger deposit.

This means monthly payments are highly likely to be more expensive if your mortgage has a high loan to value.

How much difference can the size of the deposit make?

Even an extra 5% in deposit can make a big difference to the rates you are eligible for.

More lenders offer 80% LTV deals than 85% LTV deals, and more still offer 75% LTV deals than 80% LTV mortgages.

Lesser risk means more lenders are prepared to offer mortgage products.

As more lenders offer mortgages, they have to be competitive, in order to get people to take out their mortgage products. There are a couple of key ways a lender can be more competitive. 

One is to offer the lowest mortgage interest rate, the other is to set up the rules they set around who they will lend to, and what type of property they will lend on (their “criteria” for lending) to appeal to lots of people.

So, not only are there likely to be more deals available to you, the more your put down as a deposit, the interest rates on offer could be lower and therefore your monthly costs could be far less.

Can I get a limited company buy to let mortgage with no deposit?

You could invest in a property without using cash savings at all. If you, or your company, owns other property with equity in it (you own a large proportion of it than the mortgaged amount) you may be able to remortgage that property and use those funds to put down as a deposit.

For more information on this, take a look at our page on 100% buy to let borrowing.

How our broker team can help you 

Whatever your position, have a chat with our advisors. They can talk to you about your circumstances, and how to assess the deposit you will need for a buy to let limited company investment. They can also help you compare mortgage rates with different deposit amounts.

Call free on the number above, live chat with advisors on our website or enquire online for a call back today.