Model500
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mortgage provider won't transfer personal loan to Limited Company

mortgage provider won't transfer personal loan...

One of my clients is an unincorporated partnership who operate a two house rental business.  The rentals are to private tenants.

The partnership is considering incorporation in the next year as the proprietors want to move into the commercial lettings arena but also still retain the private lettings business.

I have been giving advice on the pro's and cons of incorporating and looking at the tax implications etc etc however, the partnership have approached their mortgage lender and the lender has refused to transfer the mortgage to an LLC /LLP unless the partnership changes the existing rental properties to commercial property or increase the lending.

If the partnership was to incorporate, would the LLC/LLP still be able to obtain tax relief on the 'personal' mortgage interest (the partners remortgaged especially to take on the buy to let properties) ?

My thinking is not but I would appreciate any advice from Accounting Web users.

Has anyone had any clients in this position?  How did they circumnavigate the mortgage problem?  Any LLC/LLP friendly mortgage providers out there?

Any help much appreciated.

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By Ruddles
25th Feb 2016 08:25

Tax relief?

Against what?

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25th Feb 2016 11:39

relief against interest on mortgage Ruddles.  the partners remortgaged especially to acquire both buy to let properties.

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25th Feb 2016 09:49

What's a sole trader partnership?

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25th Feb 2016 11:23

What's a sole trader

Tim, just pointing out it wasn't already a company or limited liability partnership.

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25th Feb 2016 09:57

.

I am not aware of any lender that is willing to transfer a mortgage from personal names to another legal entity. It simply wont happen and its a bit naive of you to suggest to your clients a lender might do this.

 

 

 

 

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25th Feb 2016 11:36

.

ireallyshouldknowthisbut wrote:

I am not aware of any lender that is willing to transfer a mortgage from personal names to another legal entity. It simply wont happen and its a bit naive of you to suggest to your clients a lender might do this.

I didn't suggest.  they did it off their own back. 

my question, and perhaps I didn't make it very clear, is what to do in this situation and if there was any chance of obtaining tax relief, via a limited company, on their 'personal' mortgage interest.  they remortgaged especially to take on the two properties.  my thinking is not and therefore to follow traditional route of new limited company taking out mortgage, if at all possible.  at this stage incorporation is at the thinking of stage.

thanks

 

 

 

 

 

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25th Feb 2016 10:05

And I think you will also find that if the lender is not prepared to transfer the loan, they also won't agree to the property it is secured on being transferred either.

So the question asked by Ruddles is very much in point.  

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25th Feb 2016 10:05

LLC

.co.uk or .com site?

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By awoodj
25th Feb 2016 10:50

Remortgage

The client needs to change mortgage provider to one that will offer a mortgage in that scenario, most existing BTL lenders offering mortgages in personal names will not allow mortgages to be transferred to other structures. That means your client is down to commercial lenders at higher cost and with less choice available.

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25th Feb 2016 11:48

Remortgage

 

Thanks awoodj, pretty much as I thought.   I don't suppose you have any suggestions of reputable commercial lenders? 

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By awoodj
25th Feb 2016 12:28

Suggestions

Model500 wrote:

 

Thanks awoodj, pretty much as I thought.   I don't suppose you have any suggestions of reputable commercial lenders? 

Depends on location (more in England than in Scotland) but if they are considered experienced then Bank of Scotland and a few others will consider it as commercial lending but this is on repayment only basis and really designed for bigger portfolios. For similar products to the personal BTL lenders which sounds more appropriate in this case, then try Shawbrook, Aldermore and I think Paragon and few others operate in England as well.

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25th Feb 2016 11:25

The correct terminology would be unincorporated partnership.
Add that to your vocab. It's yours now, on me.

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25th Feb 2016 11:57

The correct terminology would

cheekychappy wrote:
The correct terminology would be unincorporated partnership. Add that to your vocab. It's yours now, on me.

 

blimey, I hadn't realised posts on this site were entered under examination conditions! :-(0)

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25th Feb 2016 11:59

Well if you can't be arsed to get the terminology correct, don't be surprised when people haven't a bleeding clue what you are asking.

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25th Feb 2016 12:08

Well if you can't be arsed to

no need to take that tone, I was jesting.  I do get your point however.

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By Ruddles
25th Feb 2016 12:02

Wrong terminology

What is relief against interest? You get relief for interest - you asked if the individuals would get relief for interest paid on continuing loans if the properties were transferred to the company, my question was - what would you relieve the interest against?

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25th Feb 2016 12:19

Wrong terminology

I can see what you're driving at Ruddles and yes, thinking logically, it helps reaffirm awoodj's response and my initial thoughts.

I am currently operating on about three to four hours sleep per night and therefore brain processing power has drained significantly hence seeking some advice.

thanks for your help

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By Glennzy
25th Feb 2016 13:43

Ineresting

I am a similar situation and when I spoke with the bank they were happy to transfer the borrowings to a limited as long as the assets held has security followed suit. They also were not seeking a second arrangement fee either which I thought was reasonable.

I guess some lenders must be more geared up to these changes than others, whilst I guess many will see at as a way to charge an extra fee, or ramp up rates to a more commerical level.

 

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25th Feb 2016 13:14

Interesting

Yes that is interesting Glennzy.  I have PM'd you.

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