From personal to Ltd Co ownership using a director’s loan

An existing client, a landlord with 5 rental properties, contacted us looking to transfer ownership of one of his rental properties to his newly established SPV Ltd Co on the advice of his accountant.

In reality this type of transaction is not a straight transfer – the client must sell the property to the SPV, which of course comes at a cost. Stamp Duty Land Tax, Capitals Gains Tax, early redemption charges and remortgage costs all apply. As this is a purchase the SPV Ltd Co must also put down a deposit.

During the sale the client planned to release equity from the property and gift it to the SPV limited company for it to use as the deposit.

Several factors meant this case would need to be taken to a specialist lender.

  1. The vendor and purchaser are related. Many lenders steer clear of related transactions.

  2. The deposit from the SPV is in the form of a director’s loan which is not accepted by all lenders.

  3. We needed a lender that has products for limited companies.

We approached an intermediary only lender which has been able to help us with cases similar to this in the past.

The following terms were offered:

Property value: £400,000

Loan amount: £300,000

LTV: 75%

Rate: 3.69% 2 Year fixed

Term: 25 years interest only

Lender arrangement fee: 1.5% of the loan amount (£4,500)

Borrower: SPV Ltd Co

Mortgage payment: £936 pcm

Rental income: £1,600 pcm

Gross yield: 4.8% pa

Consultant: Paul Martins, 01732 471616

 

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Consultant