Buying a property through a company has become increasingly common during recent years, and finance for properties owned in this way is certainly something many Enness clients enquire about.
How does buying a property through a company work?
When it comes to securing finance for such properties owned in a company, the structure of the ownership structures can vary hugely in their complexity. At the very simplest end, it might be that you are the Director of a Limited company, of which you own 100%. If you own a property wholly through this company—as many buy to let landlords now choose to do, in light of mortgage interest tax relief changes—then this is not overly difficult to secure a mortgage for.
The clients we assist rarely have such straightforward requests, however. We regularly work with clients who own their properties through offshore structures, such as British Virgin Island (BVI) or Channel Island companies. When the property is owned through an offshore company, it is much more challenging to secure a mortgage.
Likewise, buying a property through a company can be a great deal more complicated if the structure of the company is complicated, or is held in trust.
How does buying a property through a trust work?
When a property (or other asset) is bought in a trust, a person or company holds the property in trust for the benefit of the beneficiaries. A ‘trust deed’ will be established, setting out the rules for the running of the trust. This might be used for a number of reasons; for example, a property might be held in trust for minors until they grow up. Alternatively, they might be used to mitigate inheritance tax liabilities.
The trust deed must make it clear that the trust has the power to borrow money. Securing finance for properties held in trusts can be extremely difficult, because lenders will look to see where the personal liability lies; a trust structure can mean this isn’t clear.
How can I get a mortgage for a property owned in a structure?
Not all retail banks can offer mortgages for properties owned in a company, limiting your options on the high street. Fewer still will consider offering lending against properties owned in offshore companies or trusts. Ultimately, the availability of finance will depend entirely on your circumstances and the complexity of the structure involved. Lenders are essentially concerned with being able to understand where the ultimate responsibility lies; it can be difficult to ascertain which individual is liable for the debt.
Typically, private banks, commercial, or investment lenders will be the best port of call, because they have the ability to understand complicated structures, and can navigate them appropriately to understand where the ultimate responsibility lies. This is where a brokerage like Enness can add significant value; we have the experience to understand complicated structures, meaning we know which lender to approach for your case.
We can then help you to package your application appropriately, ensuring you have the best chance of a successful application. If you would like more advice about refinancing or buying a property in a company, trust or complicated structure, we would be pleased to advise you further.