If you’re over 30 and considering expanding your property portfolio, you may have come across the term “SPV mortgage” during your research. Also known as a limited company mortgage, an SPV mortgage is a specialised type of mortgage that offers unique benefits and opportunities for property investors. In this blog, we’ll delve into what an SPV mortgage is, why you might consider using one, and the potential advantages it offers.
What is an SPV Mortgage?
An SPV (Special Purpose Vehicle) mortgage is a mortgage that can only be obtained by setting up a Special Purpose Vehicle—a legal entity created specifically for purchasing and holding property. This entity is usually a limited company set up with the express intent of buying and managing real estate assets. The SPV structure ensures that the company’s activities are restricted to property-related transactions, providing a clear and focused approach to real estate investment.
Why Use an SPV Mortgage?
There are several reasons why property investors, particularly those over the age of 30, might consider using an SPV mortgage. Here are some of the key benefits:
1. Tax Efficiency
Mortgage Interest Relief: One of the main advantages of an SPV mortgage is the ability to offset mortgage interest against rental income. This can result in significant tax savings compared to holding properties in your name.
Corporation Tax: Profits generated by an SPV are subject to corporation tax, which is generally lower than the higher rates of income tax that individual landlords might face.
2. Limited Liability
Protection of Personal Assets: With an SPV, your assets are separate from your business liabilities. This means that in the unfortunate event of financial difficulties, your assets, such as your home, are protected.
Risk Management: The limited company structure helps in managing risk more effectively, as the liability is confined to the assets owned by the SPV.
3. Professional Image
Credibility: Operating through a limited company can enhance your professional image and credibility, making it easier to attract investment and secure financing from lenders who prefer dealing with corporate entities.
Brand Building: Having a company name and branding can help establish a more recognisable presence in the property market, potentially leading to more opportunities.
4. Inheritance Planning
Succession Planning: An SPV can facilitate more efficient inheritance planning. Shares in the company can be transferred to heirs without the need for complex property conveyancing processes.
Estate Management: Managing properties through a company can simplify the process of estate planning, providing a clearer structure for passing on assets to the next generation.
5. Flexibility and Control
Strategic Investment: Using an SPV allows for more strategic decision-making regarding property investments, including the ability to reinvest profits back into the company for further growth.
Operational Control: As a director of the SPV, you retain full control over the management and operations of the property portfolio, allowing for tailored strategies to maximise returns.
How to Set Up an SPV
Setting up an SPV involves several steps:
Incorporation: Register a limited company with Companies House, specifically designating it for property investment.
Bank Account: Open a dedicated bank account for the SPV to manage finances separately from personal accounts.
Mortgage Application: Approach lenders who specialise in SPV mortgages to secure financing for property purchases.
Tax Registration: Register the SPV for corporation tax and any other relevant taxes.
An SPV mortgage offers a range of benefits for property investors over the age of 30, from tax efficiency and limited liability to enhanced professional credibility and better inheritance planning. By understanding the intricacies of SPV mortgages and the advantages they provide, you can make informed decisions about your property investments and potentially achieve greater financial success.
If you’re considering applying for an SPV mortgage, consult with financial advisers and mortgage specialists to ensure it aligns with your investment goals and personal circumstances. With careful planning and strategic use of an SPV, you can take significant steps towards growing your property portfolio and securing your financial future.
