Limited Company BTL, a market that many big lenders have yet to enter, has a new entrant, and they launched a competitive product.

Coventry Building Society (AKA Godiva Mortgages), has entered the Limited Company Buy-to-Let (BTL) market, expanding its well-regarded BTL expertise to cater to landlords operating through Special Purpose Vehicles (SPVs).

This new offering targets a growing segment of professional landlords seeking tax-efficient property investment structures. Here’s a breakdown of the key features:

• Product Range: Coventry offers 2- and 5-year fixed-rate purchase and remortgage products, providing flexibility for landlords planning short- or medium-term strategies.

• SPV Flexibility: The product accommodates brand-new limited companies, making it accessible for landlords setting up SPVs for the first time.

• Portfolio Limits: Landlords can hold up to seven mortgages with Coventry, but the product is not suitable for those with 15 or more properties, limiting its appeal for larger portfolio landlords.

• Applicant Criteria: Up to four directors or shareholders are accepted, with no minimum income requirement, broadening eligibility. Applicants must be UK residents, current owner-occupiers, and not first-time buyers, though first-time landlords are eligible.

• Loan Parameters: The maximum loan-to-value (LTV) is 75%, and applicants must be no older than 85 at the end of the mortgage term.

• Credit and Stress Testing: Coventry maintains a stringent credit policy with minimal tolerance for adverse credit. Rental stress tests are lower for 5-year fixes, offering some relief, but the landlord’s entire portfolio must pass a 5% stress test.

This launch positions Coventry as a competitive player in the Limited Company BTL space, particularly for small to medium-sized landlords seeking straightforward, fixed-rate options through an SPV structure.

Mortgage Rates

How it compares

While Coventry’s Limited Company BTL offering is a strong entry, it operates in a competitive market with diverse lender criteria. Here’s how it stacks up against other BTL lenders:

• Portfolio Size Restrictions: Coventry’s cap on landlords with 15 or more properties is relatively high, as most landlords operate with fewer properties. However, for the minority with larger portfolios, specialist lenders offer more flexibility, with some disregarding properties held in SPVs when assessing eligibility.

• Loan-to-Value (LTV): The 75% LTV cap is conservative compared to competitors, who offer up to 85% LTV. This higher LTV can be crucial for landlords aiming to maximise borrowing capacity or enter the market with less equity.

• Age Limits: Coventry’s maximum age of 85 at the end of the mortgage term is restrictive compared to the broader market. Many lenders impose no age limit, while others extend to age 125, catering to landlords who plan to generate long-term rental income in retirement or intend to pass properties on as an inheritance. Coventry’s offering suits those planning to sell in later years.

• First-time Buyers**: Excluding first-time buyers aligns with mainstream lender policies, but specialist lenders may consider them on a case-by-case basis, offering a niche alternative for new entrants to the property market.

• Credit History: Coventry’s tight credit criteria, with little room for adverse credit, are stricter than some BTL lenders who allow more leniency for missed or late payments, making them more accessible for applicants with imperfect credit profiles.

• Stress Testing: The requirement for the entire portfolio to pass a 5% stress test is a notable hurdle. Other lenders may not apply background portfolio stress tests, focusing solely on the property in question, which can simplify the application process for diversified landlords.

Conclusion

Coventry Building Society’s Limited Company BTL product is a welcome addition for landlords using SPVs, particularly those with smaller portfolios, first-time landlords, or those seeking competitive 2- and 5-year fixed rates. Its lower rental stress tests for 5-year fixes and lack of minimum income requirements enhance its appeal. However, its 75% LTV cap, strict credit criteria, and portfolio stress testing may limit its suitability compared to specialist lenders offering higher LTVs, more flexible credit policies, or no age restrictions. Landlords should weigh these factors against their investment goals and consult a mortgage adviser to find the best fit in this dynamic market.

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