Last reviewed on 6th September 2023 by Martin Alexander (Mortgage Advisor)

Over recent years there has been an increase in companies applying for mortgages. LLP mortgages are typically used for investment, but they can be used for residential purposes too. Although mortgages can be taken out by a limited liability partnership (LLP), it certainly isn’t a simple process.

This guide will explain the various methods of how an LLP can get a mortgage. In addition, we’ll also look at the different types of lending criteria where an LLP is concerned.

Our advisors specialise in mortgages for the self-employed and have helped many clients secure mortgages through limited liability partnerships. It’s important to receive specialist advice in this field, as brokers are able to package your application to the most suited lender for your business.

How to apply for a mortgage with an LLP

LLP businesses can vary in the way that they’re structured and this will have an effect on a mortgage application.  For instance, the number of directors, equity shares and trading history will all have an effect on the type of mortgage an LLP is offered. As a result, it’s crucial for advisors to understand the nature of the LLP and the way that it’s structured before approaching a mortgage lender.

Getting a mortgage with an LLP is a lot more complex than mortgages for the employed. Mortgages for the self-employed tend to get scrutinised by underwriters a lot more in comparison. This is because self-employed mortgages are deemed higher risk.

A mortgage through an LLP is of course classed as a self-employed mortgage, so you can start to see why mortgage approval is far from straightforward.

What mortgage criteria does an LLP need?

The main difference in lender criteria is how the income from your LLP is assessed.

For instance, lenders will assess the LLP on the following criteria:

• Length of time the LLP has been trading for
• How the LLP is set up (partners, shares, directors)
• Declared net profit of the applicant/LLP (or total income received)
• Whether or not the LLP has any outstanding debt
• Nature of the LLP

Certain lenders may advertise slightly higher rates for mortgages involving limited companies or limited liability partnerships. This is especially true where investors have created an SPV (Special Purpose Vehicle) such as a registered business solely for property investment.

How much can an LLP borrow?

Each lender has different variables for how they’ll calculate maximum mortgage amounts. The majority of lenders generally lend between three times your annual income as a minimum and around five times your annual income as a maximum.

Lenders will also need to check the affordability of the borrower, which is standard practice for any mortgage application. As self-employed applicants won’t have payslips and a set annual income, lenders have to distinguish your income in a completely different manner.

For instance, an LLP mortgage will be assessed on the company’s income, in the form of finalised accounts or SA302 documents. Lenders will only accept documents that are either signed off by an accountant or official documents from the HMRC.

If you’re a director of an LLP but want a personal mortgage, this is also possible. This may be better suited especially if the property you want to purchase is for residential purposes.

Learn more: How to get a mortgage as a company director

Can a newly established LLP apply for a mortgage?

The length of time an LLP has been trading for can make all the difference in getting a mortgage. An LLP that’s been trading for ten years can show more stability and less risk than an LLP that’s only been trading for one year.

That said, the length of time an LLP has been trading is only one factor for a mortgage assessment. An LLP that’s been trading for ten years could be drowning in debt, so it all depends on the overall quality of the application.

The majority of lenders will only lend to an LLP that has been trading for at least three years. Having accounted for three years can show lenders how stable the LLP is, along with the income generated over this time period.

Lenders can then make an informed decision on whether or not the mortgage is affordable. For instance, if an LLP was established only six months ago, it gives lenders little insight into the financial capability of the business. Although most lenders will request three years’ accounts, specialist lenders may offer mortgages with accounts for two years.

Even if an LLP has only just filed its first year’s accounts, specialist lenders may be willing to lend. This is subject to other criteria, such as net income, company debt and so on.

As each business varies, each case is assessed in its own unique way. You can speak to an advisor to give you more information on whether or not a mortgage is likely.

Is it possible for an LLP to get a buy to let mortgage?

Getting a buy to let mortgage for an LLP can be easier in comparison to a residential mortgage. Some lenders offer buy to let mortgages solely for companies. Rates tend to be slightly higher than conventional mortgages. This is due to the increased risk of lending.

The increase in risk arises due to the limited liability of the business. For instance, if the mortgage fell into arrears, the individuals in the business wouldn’t be liable for any company debt, the company itself would be liable. As a result, lenders may also include clauses in their mortgage terms to hold directors of the LLP accountable in cases where loans aren’t repaid.

The deposit required is usually higher for a buy to let mortgage in comparison to a residential mortgage. This is irrespective of whether or not the applicant is an LLP or an individual.

Most buy to let lenders insist borrowers have a minimum 25% deposit. Mortgage rates for an LLP typically start at 60% loan to value. That being said, some lenders may offer buy to let mortgages with deposits of just 15%.

The majority of buy to let lenders now pay more attention to the rental income generated by the property rather than an applicant’s income. This is because the rental income will essentially cover the mortgage payments. Nonetheless, lenders still need to be confident that mortgage payments can be met even when the property isn’t receiving rent.

Can an LLP with company debt apply for a mortgage?

If an LLP has debt or credit problems, then it will become difficult to get a mortgage. That being said, it is possible for an LLP to get a mortgage even with debt and bad credit.

Debt and credit issues can cause an LLP to be deemed high-risk, but it also depends on the nature of the debt and the credit issues involved.

In situations such as these, lenders will look for details such as:

• The number of creditors involved
• Amount of debt the company has
• General credit history of the business

There are also specialist lenders that may be willing to offer mortgages for an LLP with bad credit. As the risk is deemed to be higher for adverse credit cases, lenders may charge higher interest rates or insist larger deposits are made.

Speak to an LLP mortgage specialist

Lenders will need to know the fine details of the LLP, such as the number of directors, shareholdings and profits. There’s a lot more that goes into a mortgage for an LLP, such as maximising affordability and securing the best possible deal that’s available.

As a business, you’ll want to ensure that you’re not overpaying on your mortgage. For this reason, it’s crucial to speak to advisors that are independent. This is so they’re able to shop around for the best deal you’ll be eligible for.

Finding the most suitable mortgage goes a lot further than simply finding the lowest interest rate, especially where a business is concerned.