Owning property through a limited company is usually targeted at getting better remortgaging rates and saving as much money as possible for improvement of cash flows. Getting an appropriate remortgage deal could enhance your returns from investment as well as promote the growth of your property portfolio. Here’s a guide to the best way of securing a favorable limited company remortgage deal.
Understand What a Limited Company Remortgage Is
Remortgage for property by the owner that means such transaction held within a limit company framework and efforts in finding advantages over the corporation tax besides limitation of liability and prospective saving over Inheritance tax; it sounds a very tempting solution and gets such landlords who approach for the incorporation. The way of remortgaging with a limited company entails buying a new loan meant to replace an old mortgage most probably for better rates or else for the creation of equity to invest further.
1. Review Your Current Financial Situation
You would want to go through your financial situation before approaching the lenders. The lenders would check your balance sheet, income potential of the property, and the amount of debt that you have already incurred. They will also be interested in knowing your personal financial situation since the directors are often asked to give personal guarantees.
The following will help you determine how good your chances are for a favourable rate:
Business profitability: Lenders must be satisfied with the money the limited company will make as a result of it generating some amount of steady income from rents.
Credit history: Both of these credits scores-counting that both your business’ and yours-indicate good records. That proves to the lender that you will be capable and responsible for your loan payments.
Property value: This is a determinant of the remortgage LTV ratio. The higher the value of your property to be remortgaged, then, the more equity in the house which can increase the chances of getting the best interest rates.
2. LTV Ratios
LTV ratio is the most crucial thing about remortgaging a property. It is performed because the loan amount is compared with the value of the property in terms of percentage.
A lower LTV ratio: The better the rates, the smaller the LTV ratio. Here, it refers to the fact that you own more equity in the property, thus reducing the risk to the lender.
Higher LTV ratios: These are slightly more risky in most circumstances and higher LTVs will also be riskier for the lenders, thus less attractive deals for remortgaging.
There are sufficient grounds to alter your position or reduce the sum that you would ultimately pay if you decide to repay the amount borrowed or significantly inflate the amount of the deposit.
3. Shop Around and Compare Intermediaries
Comparing lenders is important to know who will offer the best deal over a limited company for your remortgage. The number of lenders offering remortgages over a limited company is vast with different interest rates, terms, and fees imposed on such services.
Items that can be compared include:
Interest rates: There are both fixed and variable interest rates. With a fixed rate, you have security since you’re locking in your rate for a particular period of time. Variable interest rates normally move in tandem with the market.
Arrangement fees: These are part of one off fees made in the establishment of a mortgage. You would pay these to lenders, so make sure you factor them in your calculations.
Early redemption charges: See if you are repaying your loan before the end. Charges apply in case of redemption early. The charges add on a good sum to your cost in the mortgage.
It has the term or duration for a mortgage. A very short-term mortgage can afford you a great rate; however, the monthly payment could be fairly hefty. This long-term mortgage can give you lower paying options but attracts high-interest rates throughout.
You narrow it down best by finding better available options in either comparison sites or a mortgage broker.
4. Mortgage Broker
A mortgage broker can be very helpful in finding the best rates. They have access to a wide range of lenders and can help you navigate the complexities of limited company remortgaging. They often have insider knowledge of the market and may be able to secure exclusive deals not available to the general public.
Ensure you get a broker who can specifically cater for limited company remortgages as they will be better placed to understand the work and source good deals for your business.
5. Tax Efficiency
Corporation taxes are often lower than income taxes, and benefits from these are to be enjoyed by limited companies. Sometimes, a lender can actually offer better terms on a remortgage if he or she believes that your company is structured efficiently from the tax point of view.
Check with a tax advisor to see that your company is as tax efficient as can be. On equity release finance for further funding of property investment, one’s finances should therefore be structured correctly so that all remortgages and further investment can stay as tax efficient.
6. Proper and Clean Documentations
Ensure that your documentation is clear, accurate, and well-organized when applying for a limited company remortgage. Among other documents, your lenders will be in a position to request for the following:
- Company financial statements
- Tax returns
- Rent roll statements
- Property valuation reports
Timely submission of the above documents in the right manner can facilitate the process as well as increase your chances of getting better rates.
Getting the best remortgage rates for a limited company requires much thinking, hence being very strategic. Knowing what is currently financial, comparing other lenders, and consulting with experts increases the chance of finding an offer that best suits the need at hand in helping grow the property portfolio for clients.
You will be proactive, financially healthy within your business, and optimize the tax efficiency with the best opportunities to secure the right remortgage deal to benefit your business in the long run.
