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  • New Members

    Deposit & interest rate - holiday let finance

    Hi,

    I'm a new member looking to begin investing in BTL and/or holiday lets in the Kent estuary area.  I own a small company and plan on doing this through my LTD company.  I have discussed Ltd company mortgage products with a broker and even with the higher interest rates on these mortgages my plans seem feasible.  

    The advice and opinions I would like is whether it is better to improve cash flow and reduce the interest rate by about 1% on the mortgage by having 50% LTV or having a higher rate at 3.7% on 75% LTV and have more properties?

    Thanks

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    Hi Andy and welcome,

    My answer is given in the context that I am a very low risk investor.

    I would go for the second option, the lower LTV, until you establish "proof of concept" for demand for your holiday let.

    However, if you have significant other income, and feel confident with regards to your research, then go for the higher LTV, but be careful about scaling up too quickly until your first holiday let is established with regards to good occupancy.

    In reality, I suspect you would get a better mortgage rate if you purchased the property in your own name as a sole trader:


    You may also find this resource helpful:

    Guide to sourcing & setting up a holiday let

    You can call the PT Brokers Team on 0333 363 6507 to find the most favourable holiday let mortgage for your purchase.

    Good luck!

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    Thanks Vanessa, I have been advised by my accountant to keep the property within my LTD company but if the rates are much more competitive then it might be back to the calculator for me??

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    Why has your account advised you that?  I think you should gain clarification on that advice.

    Holiday lets are not subject to Section 24.  I have my holiday lets in my own name. Smile

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    It's due to the tax implications of releasing funds from the company to myself.  I would have to draw them as a dividend and they would be taxed at 32%, where as through a company it would be capital expenditure.

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    Hi, I would be impressed with 3.7% on lending to a Ltd company, they may want a Directors gtee as well of course. Have you banked on vat if you are registered?...

    To answer your question it really depends if your deposit funds may be needed elsewhere or just sitting on deposit... cash flow would be the same if the money is set aside.

    In general you should purchase BTL (residential) through personal purchase, commercial property via Ltd company.

    Hope this helps.

    Best wishes : Dom

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    Thanks Dom, it has helped.  I will have to double check the interest rate quoted now as you see it as surprising, there might be something amiss with my mortgage brokers offerings?

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    Its a pleasure, good luck. Best wishes : Dom

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