Buy-to-Let Company Mortgage without Personal Guarantee?

In the years around 2018, the buy-to-let mortgage market saw a significant switch in how landlords bought properties: an increased amount of corporatisation.

Landlords were forming Limited Companies in more significant numbers to buy, hold and rent out properties. The companies were typically new — perhaps a day old — with no income or assets.

So how could the company get a mortgage? Mortgage lenders asked for a Personal Guarantee.

A personal guarantee got around the "limited liability" an LTD Company typically offered and put you, the shareholder/director, on the line for the debt.

This allowed a mortgage lender to assess your circumstances, your income and your assets, and gave them reassurance that in the event of a default they could pursue any unpaid amounts from you.

Most mainstream mortgage lenders required a personal guarantee. Though not all!

A personal guarantee, as above, aimed to limit the lender's liability and risk. Obtaining a buy-to-let mortgage without a personal guarantee was possible if purchased at a low loan to value (LTV).

As a general rule, the few lenders that offered this were looking at 60–65% LTV.

With equity of at least 30–35% in the property, the lender could feel secure that they would get their funds back in the event of a default.

The reason such substantial equity was required was to allow the lender to add any missed mortgage payments and fines, and to allow for housing price fluctuations or damage to the asset.

With lenders offering buy-to-let mortgages without a personal guarantee so rare, there was a premium to pay: at mortgage rates in September 2018, an LTD Co SPV at 65% LTV could enjoy mortgages at 2.49% with a personal guarantee — 2.94% without.