Owning property in a Ltd while having a government HTB loan

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  • jpkeates
    replied
    Originally posted by Seba99 View Post
    In terms of borrowing the plan was to use bridging type loan as the property is being renovated and then to refinance at the higher property value and rental yield.
    You need to look at what that means in practice.
    Bridging loans for renovating property are, in my limited experience, scary.
    In terms of the 5% when considering a mortgage do they use personal equity in a primary residence as collateral?
    Many (most) don't.
    Also regarding tax and CGT, do companies pay CGT or just standard corporation tax?
    For a company, an increase in asset value is income not a capital gain.

    Imagine a world where there are people as smart as you.
    If there was a clever way to (legally) leverage not very much into a property portfolio, it would be commonplace.
    It isn't.


    Leave a comment:


  • Seba99
    replied
    Thanks for all the replies,

    From the sounds of it a HTB is more hassle then it is worth.

    In terms of borrowing the plan was to use bridging type loan as the property is being renovated and then to refinance at the higher property value and rental yield.

    In terms of the 5% when considering a mortgage do they use personal equity in a primary residence as collateral? As the idea behind the 5% was to free up additional funds but not essential.

    Also regarding tax and CGT, do companies pay CGT or just standard corporation tax?

    Leave a comment:


  • jpkeates
    replied
    Help to Buy is not limited to first time buyers, so that's a red herring.

    You can't apply for a Help to Buy loan if you have a financial interest in another property and you would have as a director of your company.
    You'd have to look at the detail of what you have to agree to on an actual application form, but your business won't be as separate as "normal" because you will have to personally guarantee the company lending.
    That's never going to be covered by a FAQ on a web site, you'd need the actual terms and conditions and application form.

    That relationship would disqualify you from a number of residential mortgages, for example, but not all.

    Presumably, if you qualified for a loan before acquiring anything through the company you'd be fine.

    Your plan has a number of other problems, though, so I'm not sure that helps really.

    Fundamentally, you won't be able to fund your business as you suggest, unless you are hugely wealthy to begin with (which would probably make help to buy pointless).

    Without a long trading history (and assuming you don't want to borrow at stupid rates of interest), company mortgages on BTL require a SPV of their own and (really horrible) directors personal guarantees.
    With a 75% mortgage and HTB loan, you won't be in a position to guarantee more than 5% of the value of your home, unless you have a pile of money somewhere else.

    For a mortgage lender, limited liability is a problem to solve, not an advantage. They definitely won't let you have multiple loans on multiple properties inside one limited liability company.

    Borrowing on properties to renovate them is a complete pain, because you borrow at the pre-renovation level - and BTL borrowing is usually contrained by rental value as well as asset value.
    So you can usually never borrow enough against the property, until you've spent a lot of money on it.

    Lots of lenders won't lend at all, or the borrowing is prohibitively expensive

    You are trying to combine two different business activities, property development and property investment, which would normally be kept separate - although that depends a lot on personal circumstances.
    Some of the advantages of companies for one type of business are negatives for the other and vice versa.

    Leave a comment:


  • loanarranger
    replied
    There is nothing to prevent you from setting up a Limited Company to buy and hold Property for investment , however you would be required to provide a Full Personal Guarantee , so not a limited liability as indicated. If you are being backed by other persons be careful that their individual shareholding’s do not come to the threshold which would require them to also give Full PG’s and more importantly they as a collective have a majority holding since all decisions will be assumed to be made by them and you do not have a controlling interest, this would result in a declinature by the lender.
    Directors are indeed fully underwritten by the lender and this would require you to evidence your income and expenditure with the corresponding tax returns and bank statements etc.

    Leave a comment:


  • Seba99
    replied
    Thanks for your reply,

    The reason for an Ltd company is that the plan is to renovate properties and then rent them out, but wanted to know if that would be a conflict with a HTB loan.
    ​​​​
    A company would offer in these circumstances alot of benefits including tax reliefs, limited liability and the ability for other partners to own a %

    Not sure I quite understand this "Can't see why the taxpayers (us lot..) would want to give a loan to someone/something who will not be the owner." as a help to buy is a private loan to a first time buyer. So would be my only home owned by me as my primary residency.

    And mortgages and loans to a bussines are not tax payers money.

    I mention financing as a new startup, mortgage companies would usually use your personal financial circumstances as if you where applying as a regular buy to let in your own name.
    ​​​​​

    Leave a comment:


  • theartfullodger
    replied
    Any HTB loan would presumably be paid to a human rather than a company. It will be the company that is the owner & landlord, and the individual's status of being able to afford to buy or not are clearly not the same as that of the company. Can't see why the taxpayers (us lot..) would want to give a loan to someone/something who will not be the owner.

    Is the company being considered btw as some means of paying less tax??

    Leave a comment:


  • Owning property in a Ltd while having a government HTB loan

    Hi,

    I've been looking for an answer to this question but everyone who has answered these questions on other forums have just been told that HTB is designed for first time buyers who can't afford any other properties.

    My questions is if you owned a government HTB equity loan on a property in your own name, would it be against the terms of the loan to own real estate in a Ltd company?

    My understanding is that they are different legal entities, if a structure of company A the holding company owned company B the BTL/Flipping company, then surely you are no different to owning shares in a company.

    My only concern is when it comes to financing a deal, they would use your personal circumstances to check eligibility as the company would have no trading history.

    There is nothing that states you can't do this on the HTB website.

    Looking for some real legal advice, and not to be sent to the HTB website.

    Thanks,

    Sebastiano

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