Limited Liability Partnership (LLP) Mortgages

By Kristian Derrick

Last Reviewed: 5th October 2023

According to Statista, as of July 2023, there are 4.24 million self-employed individuals in the United Kingdom.

Understandably, many self-employed individuals and those in a limited liability partnership believe they’ll struggle to get a mortgage because of how income is assessed when you’re self-employed.

For some, limited liability partnership mortgages (LLP) are the solution to buying property as a company. They can also be used for residential purposes.

While LLP mortgages are a solution for some self-employed, the application process can be anything but simple.

In this guide, we discuss how to get an LLP mortgage…

Applying for a Mortgage with an LLP

The mortgage application is generally affected by how your LLP business is structured.

The type of LLP mortgage offered depends on the total number of directors, trading history, and equity shares.

When advisors assist with setting a mortgage in place for an LLP, they will need to know more about the LLP’s nature and how it’s structured.

There are more hoops to jump through when applying for a mortgage with an LLP, as the underwriters need to look far closer at how income is earned and how much than with an employed individual.

All mortgages through an LLP are classified as “self-employed mortgages.”

Eligibility Criteria for a Limited Liability Partnership Mortgages

One of the biggest differences between a self-employed (or LLP) and employed individuals’ application for a mortgage is how income is assessed.

As an LLP, the lender will scrutinise the following criteria:

  • How long the LLP has been operating for
  • The LLP structure in terms of partnerships, directors, and shares
  • Total income received or declared net profit
  • Any outstanding debt belonging to the LLP
  • Nature of the business

It’s not unheard of for lenders to apply higher rates on mortgages for limited companies and limited liability partnerships.

Is there a Cap on How Much an LLP Can Borrow for a Mortgage?

Maximum mortgage amounts are calculated on different variables and dependent on the lender.

Most lenders will allow borrowers to access funds between three and five times your total income.

Affordability is a top priority for lenders, so income needs to be proven.

This is where it usually gets tricky for self-employed borrowers. Self-employed individuals don’t have payslips like employed people do, making it challenging to prove income.

As being self-employed is run like a company, the company income is assessed.

This is based on SA302 documents or finalised accounts. An LLP’s documents must be officially HMRC-provided or signed off by a professional accountant.

Can Limited Liability Partnerships in Debt Get a Mortgage?

Any person or entity in debt or with a credit problem will find it challenging to get a mortgage, and it’s the same for LLPs.

While it’s not easy for an LLP to get a mortgage while in debt or with bad credit, it is still possible.

LLPs in debt or with bad credit are high risk applicants, but lenders may consider providing funding after assessing the type of debt or the reason for bad credit.

Lenders will scrutinise the following when considering mortgages for LLPs in debt or with bad credit:

  • A general overview of the company’s credit history
  • How many creditors are involved
  • How much debt the company is in

Some lenders may specialise in offering mortgages to LLPs with bad credit, but this usually requires higher deposits and rates.

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Can New LLPs Apply for Mortgages?

The LLP’s age can have a bearing on the outcome of a mortgage application.

This is because LLPs operating for many years will find it easier to prove financial stability than those that have been around for just a few months or a year.

Most lenders require an LLP to operate for at least three years to consider a mortgage application.

This is because three years is a suitable amount of time to prove financial stability. Sometimes, lenders may provide a mortgage with 2 years of financials.

That said, not all LLPs that have been trading long-term can show financial stability.

Some might be in debt or earning a minimal profit, which can have a detrimental impact on the mortgage application outcome.

In rare cases, mortgages may be provided with just one year’s filed accounts, but other factors will influence the outcome, such as how much profit the business generates and if it’s in any debt.

Of course, decisions on LLP mortgage applications are determined on a case-by-case basis, so it’s best to get the advice of a mortgage advisor to ensure you’ve covered all your bases.

Can a Limited Liability Partnership Apply for a Buy-to-Let Mortgage

In some instances, it’s simpler to get a buy-to-let mortgage as an LLP than it is to get a residential mortgage.

Various lenders in the UK only offer buy-to-let mortgages for companies, which makes it simpler for LLPs.

There’s increased risk to the lender, however, which means you may have to pay higher rates.

Why is there an increased risk to the lender? This is because the business in an LLP has limited liability.

If the mortgage isn’t paid, the individuals who form the business aren’t liable for the debt.

Some lenders may recognise the risk and include special clauses in the mortgage agreement that stipulate each director is responsible for the mortgage debt if the mortgage falls into arrears.

All buy-to-let mortgages require an inflated deposit than residential mortgages.

Many lenders offering buy-to-let mortgages require a 25% with LLP mortgage rates generally starting at 60% loan to value.

This is only sometimes the case, as the market does show some lenders allowing buy-to-let mortgages with deposits as low as 15%.

If the property is for a buy-to-let purpose, the lender may find the mortgage more favourable as it will receive monthly rental income, thus securing the loan to some degree.

This is viewed in conjunction with the borrower’s personal income amount.

The reason for both the rental and personal income to be assessed is to ensure that the mortgage instalments will still be paid, even when the property is vacant and not generating a rental amount.

Limited Liability Partnership Mortgages (LLP) Conclusion

If you have an LLP and would like to get the best possible mortgage deal, it’s a good idea to consult with a professional mortgage advisor.

The right advisor will be able to advise you on the best options and what to expect when applying.

Call us today on 01925 906 210 or contact us to speak to one of our friendly advisors.

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