Moving house is never easy, no matter your circumstances.

Many sellers struggle to say goodbye to their homes; especially if you’ve spent countless hours and funds on renovations. 

And even if you’re 100% on board with selling away your home, you’ll have to deal with the stress of finding a reputable buyer, negotiating a price with them, and coordinating with them on moving day.

But what if you didn’t? What if you could purchase a new property without losing access to your current home?

Turns out, you can; by renting out your home to new tenants as a buy-to-let via your own SPV limited company. 

Growing numbers of first-time investors are utilising limited companies to turn their old homes into money-making investments; while simultaneously unlocking the purchasing funds for a bigger and more luxurious place to live.

Why are they doing this? How are they doing this? And is it worth joining them?

Let’s find out…

What’s the process?

In order to transfer your existing home into a limited company, your limited company needs to  purchase your home from you at market value. 

You can then start using your old home to make money by letting it out to new tenants. Those rental profits can be used to pay off the cost of the sale.

Meanwhile, the equity you’ve freed up by selling your home can be used as a deposit for purchasing your new home, as well as stamp duty and legal fees (as long as you have enough equity to cover them). 

This means you can potentially secure the perfect home you’ve always dreamed of owning; without dipping into your cash resources.

You can almost think of the process as selling your home to yourself, since you’re the one who owns and runs your limited company. You won’t need to give up ownership of the limited company in order to transfer your home into the company.

For clarity in this article, though, we’ll be talking about yourself and the limited company as separate entities.

What are the advantages?

As well as the efficiencies of corporation tax versus income tax, and the aforementioned equity release which enables you to put down a deposit on your dream home, the other big advantage of transferring your old home into a limited company is that you’re essentially the buyer and the seller for your own property.

This means the limited company’s purchase of the property, at the very least, is chain-free. In other words:

• You won’t have to track down a buyer
• You won’t lose equity by being negotiated down on price
• You won’t have to worry about buyers pulling out at the last minute
• As the SPV company’s director, you’ll retain access to your old home – so you can move out at your own pace!

Can you live in your old home once it’s been transferred to the limited company?

Short answer; no.

Limited company mortgage products are unregulated; i.e. they’re designed for investors, without the same level of Financial Conduct Authority protection given to homeowners on residential mortgages. 

Pretty much any limited company mortgage lender will insist that directors and shareholders of the limited company must not live in the properties that the limited company owns. 

Both property transactions – selling the current home to the limited company, and buying a new home – need to be carried out simultaneously. Lenders will expect the property to be let out fairly quickly once it comes under the company’s ownership.

Stamp duty and capital gains tax

Do you pay CGT and SDLT on limited company home transfers? 

In most circumstances, since your home is your main residence, you won’t pay any capital gains tax when you sell it to your limited company.

However, your limited company will pay additional stamp duty rates on the purchase, which are 3% higher than the standard rates. 

(As for purchasing your new residence in your own name, you’ll pay standard stamp duty rates.)

How much stamp duty will you pay on your home transfer? Find out in seconds with our intuitive stamp duty calculator!

Limited company solicitors

You’ll need two different solicitors to facilitate the transfer of your home into your limited company; one for selling, and one for buying.

For selling the property to the limited company, you can use any solicitor you like. Y

Things are a little trickier when it comes to buying the property through the limited company. Your limited company mortgage lender will have a list of approved solicitors that can work on behalf of your limited company and the lender. 

This means your limited company will only pay a single solicitor’s fee on the buying side (although keep in mind that you’ll have the fee from your own solicitor on the selling side).

We highly recommend choosing a lender-approved solicitor. If you go with your own choice instead, your limited company will be dealing with double the cost and three times the admin headaches!

Deposit requirements

As with any mortgage-financed property purchase, your limited company will need to provide a deposit to complete the purchase. 

Thankfully, the equity you’ve already built up in the property can often be used by the limited company to fund the deposit. It works like this:

• Let’s say you have a £500,000 residence, and you want to buy a new home for £1mil. 
• Your limited company secures a 75% LTV mortgage (£375,000) to buy the property; so where’s the 25% deposit coming from?
• Well, you transfer 25% of the equity you have in the property to the limited company as a director’s loan. Effectively, you loan 25% of the value of the property (£125,000) to the limited company, which the limited company will need to repay to you at a later date.
• Meanwhile, the £375,000 will be paid to your own account on completion of the sale of the property; which can then go towards buying your new £1mil home.

It’s important to note that not all lenders will enable you to transfer equity via director’s loans, so be sure to check with your solicitor.

Here’s another option for funding the deposit. If you have a pre-existing company with retained profits (also known as retained earnings), you can transfer those profits to the limited company as an inter-company loan. 

You generally have the freedom to set your own loan terms too; but again, make sure you run things by your solicitor to keep the property transaction running smoothly. 

Unfortunately, getting an inter-company loan wrong can see your mortgage application going straight in the bin; which will grind the process to a halt.

If neither of these options works for you, and your limited company is struggling to fund the deposit, you may need to gift the deposit funds to the limited company instead. 

This is far from ideal from a tax perspective, as you’ll likely be hit with capital gains tax. You’re much better off transferring equity as a director’s loan, and plenty of lenders will let you do this; so don’t be discouraged if your first choice of lender refuses.

Mortgage porting

Now, we’ve talked about mortgages and deposit requirements for the limited company; but what about yourself? 

You’ll still need to secure a new residential mortgage to purchase your replacement home. This might be tricky if you’re still on a fixed rate which isn’t due to expire any time soon; after all, won’t you just get hit with early repayment charges?

Not necessarily. Many lenders will enable you to ‘port’ your existing mortgage to the new property; which means you’ll sidestep early repayment penalties entirely.

What’s more, if you’re looking to buy a more expensive home than your current one, your lender may be happy to let you ‘top up’ the mortgage balance to the new property’s value. (This is often done in the form of a second loan that sits alongside the existing mortgage.)

Portable mortgages do come with risks, however:

• You effectively need to reapply for your mortgage; and there’s no guarantee that you’ll get it, despite your success in getting the original mortgage in the first place.
• You won’t necessarily get the same deal you were on with the original mortgage. Ports may come with less attractive rates; and if your top-up comes in the form of a second loan, the fixed rate terms between the existing mortgage and the new loan may not match up. (That said, many of the bigger high-street lenders are willing to help their customers in this regard.)

Is it worth it?

Should you transfer your home into a limited company?

That’s the question you need to be asking yourself before getting stuck into the process. Here at SPV Mortgages, here’s what I suggest to my clients.

Think of your current residence not as your home, but as an investment. You have capital in that property (in the form of equity).

In the long run, what’s the best use of that capital? 

Do you transfer it to the limited company, start earning rental income and buy a new home?

Or, do you keep your home and invest in a different property altogether; perhaps funded by releasing equity from your home?

Alternatively, do you leave property investment plans on the shelf for now, and focus on selling your home in your own name to buy a new one instead?

Think about how your current residence stacks up against other potential investments:

• Does it have good capital growth prospects?
• Does it offer good potential rental yields?
• Realistically speaking, will you be able to keep it let and occupied consistently?
• Are rents and property prices expected to grow in your geographic area?

If the answer to all four is a resounding yes, what about the stamp duty costs? Don’t forget, your limited company will unfortunately have to pay SDLT on the sale of the property.

Work out how long it will take you – after other expenses and taxes are factored in – for your limited company to make back your SDLT costs.

Is the timeframe reasonable for you? If so, maybe transferring your home to a limited company is the right choice for you. If not, perhaps it’s better to consider your other options.

A final pro tip: chain-free buying

As mentioned earlier, while yourself and the limited company exist as separate legal entities, you’re effectively still the buyer and the seller of your current home.

This means that you’re ‘chain-free’; you’re not relying on a sale from a third-party to go through, and you’re not at the mercy of them cancelling their purchase at the last second.

When it comes to buying your new replacement home, being chain-free makes you more attractive to sellers and gives you a little more bargaining power for price negotiations and the like. 

That said, be sure to check that the numbers work out. If your current home is likely to underperform once it becomes an investment asset in your limited company, being chain-free won’t really help all that much for your finances in the long run.

Speak to a mortgage advisor, and get them to check how the transfer of your current home into the limited company and the purchase of a new home will affect your outgoings.

In conclusion…

So there you have it; transferring your current home into a limited company could be a fantastic way to start your portfolio, while also enabling you to purchase your dream home.

But as with any investment move, it comes with risks; so make sure you do your due diligence up front, and examine whether your current home will be the right asset to power your future plans.

The expert mortgage brokers at SPV Mortgages can review your finances and advise whether a limited company property transfer is right for you; plus, we can help you find and secure the best residential and limited company mortgage deals.

Book your consultation today. Let’s talk