Kent Reliance will now lend to clients seeking to borrow for a buy-to-let mortgage through a limited liability partnership, as the option emerges as way around government changes to how property investment is taxed.
The specialist mortgage lender stated their change in criteria includes borrowers who wish to switch a buy-to-let asset from an individual name into an LLP.
Providing loans to non-trading LLPs is now part of its standard lending policy and new applications will be subject personal guarantees for 100 per cent of the loan provided by all LLP members, and evidence the company is non-trading.
Adrian Moloney, sales director at the lender’s parent OneSavings Bank, said: “Following the chancellor’s recent changes we introduced products designed specifically for property investors who were moving their investments into a limited company.
“We are pleased that we can now extend the same proposition to support LLPs.”
The firm urged borrowers to seek professional advice from a suitably qualified professional prior to entering into any transaction.
Following the announcement in last year’s Summer Budget of a phased change to tax relief on mortgage interest for landlords from 2017 onwards, incorporation of a limited company has been seen by many as the preferred means of holding investment property.
Then in the Autumn Statement, the chancellor levied a 3 per cent premium on stamp duty for buy-to-let investors and those buying second homes, driving more landlords to investigate switching properties from their name into a company or partnership structure.
By March, evidence was emerging that some landlords were going down the limited company route, although only a handful of high street banks were assessing whether to get involved in the market.
Nick Green, a broker at Alternative Estates & Financial Services, said lenders keep talking about looking into limited company structures, but he has seen little demand.
“As and when the lenders move into this area, they need to consider both sides otherwise the landlords will own properties as a limited company, but will have restrictions on who they can sell them onto.
“The other consideration is the higher interest rates charged for specialist lending to LLPs or limited companies and the potential capital gains tax on the transfer. I’m not sure on the tax side for the LLP, but it would apply to the limited company, as I understand these rules are being reviewed at the moment.”
peter.walker@ft.com
