SPV buy-to-let mortgages

An SPV, or special purpose vehicle, is a limited company set up only to buy, hold and let property. It does no other trading, which makes it simpler for lenders to assess, because the company's income comes from rent and its costs are mainly mortgage interest, repairs and management. Most limited company buy-to-let lending goes to SPVs.

An SPV is registered at Companies House like any other company, with one or more directors and shareholders. Lenders look for standard industry codes that describe letting or managing property, and some accept a short list of related codes.

Setting up an SPV for buy-to-let means registering a company at Companies House with property letting codes, appointing directors, issuing shares and opening a business bank account. Many landlords use an accountant or a formation agent to do this. The company should be set up before the purchase, so the mortgage application and the purchase are in its name.

Choosing who holds shares, and in what proportions, affects how profit is shared and taxed. Lenders often limit the number of shareholders, ask that each director with a significant stake guarantees the loan, and may restrict overseas or corporate shareholders.

Lenders check the company's registration, codes, directors and shareholders, then the expected rent against the mortgage interest at a stressed rate. Directors' credit history, experience as landlords and other property owned all count. A newly formed SPV with no accounts is usually acceptable, because lenders rely on the rent and the directors.

Some lenders accept SPVs owned by another company, often called a holding company structure, and some lend to SPVs with overseas directors. Fewer lenders cover these cases, and the terms can differ.

Lenders that offer SPV lending, and how they differ on structures and rent tests, are compared on the limited company mortgage lenders page.

Landlords often use one SPV for several properties, which keeps the paperwork in one place. Once a company owns four or more mortgaged rental properties, many lenders treat it as a portfolio landlord and review the whole portfolio when it applies for new borrowing. That means business plans, schedules of property and cash flow forecasts.

Some landlords set up separate SPVs for different properties or partners. Each company then needs its own accounts and filings, so the extra costs need weighing against the benefits.

Moving a property owned personally into an SPV is treated as a sale at market value, so stamp duty and capital gains tax can be due, and a new mortgage is needed in the company's name. Some landlords who operate as a genuine property business may qualify for relief, which needs specialist tax advice before any transfer.

Because of these costs, many landlords keep existing properties personally and buy new ones through an SPV.