Borrowing to Buy Property Through a Company or Trust

Which structures can borrow?

• Company: the company owns the property and borrows in its own name. Directors usually give personal guarantees.
• Family (discretionary) trust: the trustee, often a company set up for the purpose, owns the property on behalf of the trust and borrows as trustee.
• Unit trust: similar, with the trust's units held by the investors in set proportions.

Lenders' appetite varies by structure. Some lend to all three on similar terms to personal loans, some lend with tighter limits or different pricing, and some do not lend to certain structures at all.

What lenders usually ask for

• The trust deed or company documents, so the lender can check who controls the entity and that it is allowed to borrow and buy property.
• The entity's financial statements and tax returns, if it already trades or owns assets, along with the directors' or guarantors' own income documents.
• Details of the directors, trustees and guarantors, who go through identity checks and credit assessment like any borrower.
• Personal guarantees, which make the guarantors personally responsible for the debt if the entity cannot repay it.

Personal guarantees are a real commitment

Buying through a company or trust does not usually separate you from the loan. A personal guarantee means the lender can pursue the guarantors if the entity defaults. It is worth understanding exactly what you are guaranteeing before you sign, and your solicitor can explain the documents.

Name the right buyer on the contract

The buyer named on the contract of sale should be the entity that will own the property. If a contract is signed in your own name and the property is meant to go into a trust or company, changing the buyer later can cost extra stamp duty and delay the loan. Settle the ownership plan with your accountant or solicitor before you sign.

Tax and costs differ too

Stamp duty, land tax and income tax can apply differently to companies and trusts than to individuals, and setting up and running an entity has its own costs. These are questions for your accountant, and they are part of deciding whether a company or trust is right for you.

How we help

Once your accountant or solicitor has set the ownership plan, Danny checks which lenders on our panel of 30+ accept the structure, structures the lending to fit it, and keeps your accountant, solicitor and the lender updated through to settlement.