Can a limited company take out a holiday let mortgage?
Yes, limited companies and Special Purpose Vehicles (SPVs) can take out holiday let mortgages.
This approach has grown more popular in recent years, with about 15-20% of holiday let mortgages now being arranged through company structures rather than individual names. If you’re considering investing in holiday accommodation, understanding how company mortgages work can help you decide if this route makes sense for you. Let’s look at the key aspects of company holiday let mortgages and what you need to know.
Understanding Holiday Let Mortgages for Companies
When a limited company applies for a holiday let mortgage, most lenders expect it to be set up as an SPV.
An SPV is simply a company created for a specific purpose – in this case, holding property. Most lenders require your company to have the correct SIC code (68209 – other letting and operating of own or leased real estate) registered at Companies House.
The assessment process differs from personal applications. Lenders will examine both the company’s status and the financial position of its directors. Most will ask for personal guarantees from directors, which means you’re still personally responsible for the debt despite the company structure.
Holiday let mortgages are different from standard buy-to-let products. They’re designed for properties that will be let on a short-term basis to holidaymakers rather than on longer tenancy agreements. The property must meet the lender’s holiday let criteria, including location, expected occupancy, and rental projections.
Benefits of Company Holiday Let Ownership
Company ownership offers several advantages for holiday let investors. One of the biggest is tax efficiency. While individuals pay income tax (up to 45%) on rental profits, companies pay corporation tax (currently 19-25% depending on profits). This can mean substantial savings for higher-rate taxpayers.
Another key benefit is that companies can still deduct all mortgage interest as a business expense before calculating tax. Individual landlords lost this advantage for residential lets, but holiday lets under company ownership maintain full interest relief.
Limited liability protection is another plus – though this is often reduced by personal guarantees on the mortgage. Companies also offer more flexibility for inheritance planning and bringing family members in as shareholders.
What to Consider Before Applying
Company holiday let mortgages do come with some drawbacks. Interest rates are usually 0.5-1% higher than rates for individual applications. You’ll also likely need a larger deposit – most lenders ask for 25-40% down payment for company applications compared to 20-25% for individuals.
Most lenders require company directors to have a minimum income of £25,000-£30,000 from sources outside the holiday let business. This ensures you can support the mortgage if rental income drops. The company will also need clean credit history, though some lenders take a flexible approach to minor credit issues.
There are fewer lender options for company applications, which can limit your choices. You’ll also face additional costs for company formation and annual accounting, which need to be factored into your financial planning.
How a Broker Can Help
Securing a holiday let mortgage for a limited company involves navigating complex criteria that vary widely between lenders. A mortgage broker with experience in this area can match your circumstances to the right lender, potentially saving you time and money.
Brokers have access to specialist lenders who may not deal directly with the public. They understand which lenders are more flexible with company applications and can help prepare your application to address potential concerns before submission.
A good broker will also help you weigh up whether a company structure is right for your specific situation, considering your tax position, future plans, and overall investment strategy.
For personalised advice on holiday let mortgages for your limited company or SPV, speaking with a specialist broker is your best next step.