Specialist
Commercial Buy to Let Mortgage
Require buy to let finance?
Speak to us today...
Require buy to let finance?
Speak to us today...
A commercial buy to let mortgage allows you to purchase a non-residential property for the purposes of renting it out to commercial tenants. This could include;
As an investor, you are essentially buying the property as a commercial landlord with the intention of generating rental income from businesses operating on the premises.
Commercial buy to let mortgages function similarly to standard buy to let mortgages for residential properties, but with some key differences:
At Clifton Private Finance, our expert mortgage brokers can guide you through the intricacies of commercial investment property financing.
While some property investors operate as individuals, there are several advantages to setting up a limited company to manage your commercial buy-to-let portfolio:
However, there are some potential downsides to consider as well:
Overall, incorporating provides significant tax advantages and operational benefits for commercial property investors, especially those with larger portfolios. Working with expert brokers, such as us, at Clifton Private Finance, can help guide you through the process.
Mortgages for buy-to-let businesses can be more restrictive than those for individual landlords in some cases. One common requirement is that the BTL Company must be established with accounts for multiple years before being accepted for certain mortgage products.
However, this is not universally the case, and with assistance from an experienced broker like Clifton Private Finance, you should be able to find a suitable commercial buy-to-let mortgage even if your company is newly formed - though you may face more restrictive terms initially.
Once a buy-to-let business has been properly established with a strong financial track record demonstrating lower risk, the range of competitive mortgage options increases significantly.
As part of their risk assessment, commercial mortgage lenders will conduct a buy-to-let stress test on your application. This financial analysis determines whether you can still afford the mortgage repayments if circumstances become less favourable in the future.
The lender then simulates a scenario with higher interest rates, usually around 5-7% above their current standard variable rate. This artificially inflated rate is used to calculate whether your rental income would still be sufficient to cover the increased mortgage payments.
The assessment takes into account not just the mortgage costs, but also other associated expenses like maintenance, management fees, building insurance and more. If your projected rental income can adequately cover these higher simulated outgoings, you pass the buy-to-let stress test.
Converting a personal buy-to-let property into a commercial buy-to-let business can involve significant costs and complexities. Here are the key considerations:
To transfer existing buy-to-let properties into a company structure, you effectively need to sell the properties to the company. This will incur costs such as:
One potential benefit of a company structure is that mortgage interest is treated as a business expense, reducing corporation tax liability. However, this must be weighed against other taxes like Stamp Duty and Capital Gains Tax incurred during the transfer. It’s crucial to carefully evaluate the upfront costs against potential long-term tax savings.
Seeking professional financial and legal advice is highly recommended before making this transition
Here are the key tax considerations for commercial buy-to-let properties held in a limited company structure in the UK:
When commercial properties are held in a limited company, the rental income is subject to corporation tax at 19%, rather than being taxed at the individual's personal income tax rates (20%, 40% or 45%). This can provide significant tax savings for higher-rate taxpayers.
For commercial buy-to-lets held in a company, mortgage interest payments can be deducted as a business expense before calculating taxable profits. This is not allowed for personal buy-to-let properties.
When withdrawing profits from the company, shareholders pay dividend tax at 8.75% (basic rate) or 33.75% (higher rate) on the dividends received, in addition to corporation tax paid by the company.
Companies pay a higher rate of Stamp Duty Land Tax (SDLT) when purchasing commercial properties, with a 3% surcharge on top of the standard rates in England and Northern Ireland. This increases the upfront costs.
Unlike personal ownership, limited companies are generally exempt from capital gains tax when selling properties. Instead, any gains are subject to corporation tax when withdrawn from the company.
For commercial properties, landlords can opt to charge VAT on rents, allowing them to reclaim VAT paid on expenses. Residential rentals are VAT-exempt. It's crucial to carefully evaluate the potential tax savings against the higher upfront costs and complexities of operating through a limited company structure, while considering your specific circumstances. Professional tax advice is highly recommended.
While there are some cases where the capital gains tax liability would have been lower, the corporate structure tends to provide an advantage in most scenarios.
For a better initial understanding of what you'll pay for a commercial buy to let mortgage, use our commercial mortgage calculator.
When considering financing for your buy-to-let business, it's common to focus solely on the mortgage. However, you may want to look at your business more holistically, improving cash flow and operational efficiency.
A buy-to-let business, like any business, requires sufficient working capital, funds for expenses like contractors, utilities, administrative costs and staff salaries. There are many additional finance options available:
At Clifton Private Finance, we have a dedicated team of property finance experts ready to assist you with all aspects of your buy-to-let business. As a specialist mortgage broker, we have strong relationships with all the major UK lenders as well as access to a wide range of niche mortgage products and business finance solutions.
Speak to us today to discover how we can help you get your buy-to-let business off the ground and operating optimally. We provide:
To see what we can do for you, call us at 0203 900 4322 or book a free consultation below.
Yes, commercial buy-to-let mortgages are specifically designed for purchasing non-residential properties to rent out to business tenants like offices, retail units, industrial properties and more.
Most commercial buy-to-let lenders require a minimum deposit of 25-30% of the property's value, though this can vary based on your personal circumstances and mortgage amount.
This depends on factors like the property value, your income and assets, existing debts and creditworthiness. Generally, you may be able to borrow up to 70-75% of the commercial property's market value with a buy-to-let mortgage.
When purchasing a commercial property over £150,000, stamp duty rates start at 2% and rise incrementally to 5% for properties over £250,000. There are different rates for lease premiums and non-residential lease renewals.
From initial inquiry to mortgage offer, the application process typically takes 4-8 weeks when going through an experienced broker like Clifton Private Finance. More complex cases may take longer.
I approached Clifton Private Finance to help me get a mortgage as an Expat working in the Far East. I would normally 'cut out the middle man' on something like this and try to get myself a deal directly with the banks, but I am now sold on the broker concept and wouldn't hesitate to use Clifton Private Finance again. There were a number of complicating factors such as being an expat, the stamp duty holiday, the sheer amount I wanted to borrow and the fact I wanted it all wrapped up before the Stamp Duty holiday ended. It is clear to me now that the relationship that brokers have managed to foster with their banks means they can simply pull levers and make stuff happen that us ordinary folk cannot. Put simply, they are worth every penny, will take most of the stress out of the lending process, and seem to have access to deals that you just won't find on the internet. Thank you George and Jan for all your hard work!
James M
Luther was excellent. Very clear in his advice and explanations of products and was able to move things on very quickly when we ran into difficulties with the estate agents. Without a doubt I would recommend Luther to all friends, family and colleagues. Luther was a joy to deal with and took a lot of the stress out of a troublesome transaction, from my end. I would view Luther as real asset to Clifton Private Finance Ltd.
William W
The team at Clifton Private Finance has been outstanding, not only in helping me to obtain a mortgage on a slightly unusual home, but also in continuing to provide support and liaise with the lender and solicitors through to completion. Thank you for making the process of buying my first home much easier.
Chantelle S
Sam O'Neill, and the new lender he identified for me, worked tirelessly together using my time constraints, to make sure my mortgage application was completed on time. They are a brilliant company to work with, fast, efficient, open and transparent from the very beginning, and turned a seemingly impossible situation into a viable one. Sam was brilliant throughout the whole process and I would highly recommend him, and his colleague Helen, to anyone without hesitation, I cannot speak highly enough about them.
Myr B
I was incredibly lucky to find Clifton Private Finance after a search on line as their service has been more than exemplary. My point of contact was Sam 0’Neill and he was happy to help at every stage during the application of the bridging loan, making a stressful process much easier to deal with. He was always available by phone or email and gave prompt answers to queries I had as well as always getting back to me when he said he would. That to me is excellent customer service and I cannot thank him personally or the company enough for the support they have given me.
C Jefferey
Adam cannot thank you enough for all your support throughout this arrangement. You have gone more than the extra mile to support us. Without you we would not have got our dream retirement home. You have been most professional and personable. Liz and I would be more than happy if you wanted to use us a reference with respect to any future clients.
Nigel & Liz K - Bristol
You have certainly shown me that you do everything for your clients, including tolerating their excessive emails and questions for updates. I have been kept in the loop, from yourself, about why the delays were occurring (Nationwide, post etc) which I would like to highlight that I really appreciated. I certainly will be able to recommend you to others as and when the need arises.
Mr Morris
I recently contacted Clifton Private Finance after a Google search for bridging finance providers and was immediately struck by their efficiency and support. Forms were emailed over almost immediately and the necessary finance was arranged within a few days. None of the other companies I contacted came close to their professionalism, and the quote that I eventually received was impressive. Thank you Adam, your help has enabled us to reserve the house that we wanted and I certainly recommend you to others.
Mr M. R. - Oxford
Absolutely brilliant. The service was first class, got everything sorted efficiently and were always friendly. Any fees were negligible compared to the service offered. Robert was particularly outstanding.
Charles N
My advisor, Robert, was very helpful in finding the mortgage to suit me. He kept me up to date throughout the process and dealt with any issues when they arose.
Rowena C
