Mortgage SPVs Explained: What They Are and How They Work

If you’re thinking about investing into property through a limited company, you’ve probably come across the term ‘SPV mortgage’ and wondered what it actually means.

An SPV is a limited company created specifically to hold property investments. These arrangements are most common for landlords, investors, and developers who are looking to build a property portfolio.

But how does an SPV mortgage arrangement work, and how can this help you?

In this article, we jump into everything you need to know about SPV mortgages. From practical tax benefits to lender criteria and regulations, by the end of this article you will know exactly what an SPV is and whether it suits your property investment goals. Let’s begin.

What is an SPV Mortgage?

An SPV (Special Purpose Vehicle) mortgage is a specific type of mortgage loan that is designed for limited companies whose express business is to hold and manage property investments. The term Special Purpose Vehicle (SPV) simply refers to a legal entity that is set up for one clear purpose.

Unlike a personal mortgage, an SPV mortgage loan is linked directly to the company, rather than an individual borrower. This can help company owners keep their business and personal finances separate.

With this in mind, an SPV mortgage can offer buy-to-let and holiday let investors a more structured way to invest and build their property portfolio. In addition, it can also provide flexibility when managing assets, potential liability, and potential tax relief benefits.

How Does a Mortgage SPV Work?

An SPV mortgage works linking the loan directly to a limited company,rather than an individual. As a result, the limited company will hold all liabilities and responsibilities for repaying the mortgage, keeping the investor’s personal finances separate.

Example of how an SPV works:

• Let’s say John wants to buy a buy-to-let property. Instead of taking a personal mortgage, he sets up a limited company (SPV) to own the property.
• If approved, the mortgage is then taken out in the company’s name. The SPV will receive the rental income, and this is then used to repay the mortgage loan.
• John’s personal finances and assets remain separate from the property’s liabilities, and he can now manage multiple investment properties more easily through a single SPV.

It’s worth noting that some lenders may also ask for a personal guarantee when lending to an SPV. This would mean that the individual behind a limited company could be asked to cover the loan if the SPV cannot meet its repayments. This is completely up to the lender’s discretion and criteria, however, it is not uncommon and lenders often use this to offset any perceived risk.

There are lenders who specialise in arranging SPV mortgages. As such, SPV mortgage lenders may assess risks different from popular high-street lenders. It is always best practice to work with a trusted whole-of-market broker to get the full picture of your mortgage and lender options.

At Boon Brokers, we provide fee-free, whole-of-market advice, helping you compare the best SPV mortgage deals and find a solution tailored to your investment goals.

How to set up an SPV limited company

Setting up an SPV is usually a quick and easy process. You can register a limited company online following the government site. However, if you’d prefer, a solicitor or accountant can also complete the setup process for you, ensuring everything is structured correctly from start-to-finish.

1. Decide on the Company Type
2. Appoint Directors and Shareholders
3. Choose a Company Name and Registered Address
4. Prepare your Governing Documents
5. Register with Companies House
6. Register for Taxes and Open a Company Bank Account

Why Do Lenders Use Mortgage SPVs?

A main concern of lenders is to manage a borrower’s affordability and risk. As such, lenders can often favour SPVs because they offer a clear and simple way to manage and contain risk. By issuing a mortgage to a separate legal entity, banks can isolate the property and its income from other financial activities.

This structure allows for off balance sheet treatment, which means the SPV’s mortgage and other liabilities are kept separate from the lender’s main accounts. This allows the bank to manage risk more effectively, as any issues with the SPV won’t affect its wider portfolio. At the same time, investors benefit from having their personal finances separated from the property’s liabilities.

The overall ability to focus an SPV risk management is another key advantage for lenders. Following their criteria, lenders will be able to quickly assess an SPV’s affordability and ability to repay the mortgage based on the property’s rental income, the company’s accounts, and the projected income.

Ultimately, this makes lending much more predictable, and therefore, allows banks to offer finance on investment properties that might be more complex or higher risk under traditional lending rules.

Using SPVs also simplifies the reporting and accounting for lenders. Since the SPV is a distinct legal entity, all assets, liabilities, and mortgage repayments are contained within the company, making it easier for lenders to track performance and enforce covenants if needed.

Overall, the SPV structure provides lenders with greater certainty, protects the broader banking portfolio, and supports more flexible lending options for property investors.

What Are the Benefits of Using Mortgage SPV in the UK?

There are several advantages to using an SPV mortgage, including access to more competitive mortgage rates, keeping property finances separate from personal accounts, and greater flexibility when managing multiple investment properties.

Below we have listed the main advantages that come with an SPV mortgage for limited companies:

Helps Protects Personal Finances and Builds Company Credibility

Holding properties within an SPV will separate your personal assets from your investment properties. As a result, should a property face financial issues, your personal finances will not be directly affected.

In addition, holding properties through an SPV sends all the right signals to  lenders when it comes to building a property portfolio, making securing finance easier in the future.

As we’ve noted before, some lenders will require a personal guarantee when lending to an SPV, and so it’s always important to check your chosen lender’s criteria and requirements.

Interest Tax Efficiency and Lower Corporate Tax Rates

An SPV is legally a business, and as such will have different tax liabilities and expenses than a personal let-to-buy arrangement. This allows investors to treat mortgage interest as a business expense, meaning it can be deducted from the property’s rental income before tax is calculated.

Consequently, this helps reduce the amount of corporation tax the company pays, lowering overall costs and making it easier to manage cash flow.

Ultimately, when compared with borrowing in your own name – where tax relief on mortgage interest is restricted – an SPV can offer significantly greater financial efficiency.

Transferring Property Ownership With an SPV

Transferring property within an SPV can be much easier than transferring a property personally. In most scenarios, you will be able to transfer shares in the company, rather than the property itself, which can ultimately save time, reduce costs, and simplify all legal processes involved.

Faster Portfolio Expansion

Using SPV to manage your properties can allow each property to be managed under its own corporate structure. In turn, this makes it much easier to take on additional properties in the future, and organise finances with a focused approach, supporting quicker and more structured growth of your property portfolio.

Are Mortgage SPVs Regulated and Taxed in the UK?

Yes, all SPVs are regulated and operate under UK company law. This means they must follow the same rules as any other limited company, including corporate reporting and filing requirements, providing transparency and reassurance for both investors and lenders.

When looking at tax benefits specifically, an SPV mortgage can offer specific company tax benefits. Notably, rental profits are treated as corporate income and are subject to corporation tax rather than personal income tax.

This can reduce the overall tax burden and makes reinvesting profits easier. Expenses, including mortgage interest, property maintenance, and management fees, are generally deductible, further reducing taxable profits.

Understanding the full scope of SPV tax implications and compliances will help investors make the most of the financial advantages an SPV mortgage can offer.

At Boon Brokers, our expert mortgage advisers can help you find the SPV mortgage that best suits your needs. We offer a completely fee-free service with whole-of-market advice, exploring all options to secure the most suitable mortgage deal for your property investment.

Speak to a Specialist SPV Mortgage Broker

There is a lot to consider when exploring an SPV mortgage, and the process can quickly feel complex or out of reach. Working with a trusted mortgage broker can help answer your questions, ease your stress, and guide you towards the SPV mortgage that best suits your needs.

At Boon Brokers, we take the time to understand your mortgage needs and investment goals. Our expert mortgage advisers will help identify lenders that specialise in SPV mortgages, guiding you through your mortgage journey every step of the way.

With our completely fee-free, whole-of-market service, our experts search across 100+ UK lenders – including specialist SPV mortgage providers and high-street banks – to ensure you have access to the most competitive rates and find a mortgage that matches your portfolio and investment plans.

Want to know how an SPV mortgage could help you?

Contact Boon Brokers today to speak with our expert mortgage team.