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Lenders requiring more personal guarantees from buy-to-let landlords
Sep 18, 2023
Lenders requiring more personal guarantees from buy-to-let landlords London
By   RYAN BEMBRIDGE
  • City News
  • UK Housing Market
  • Rental Guarantee
  • Buy to Let Guarantee
Abstract: An increasing number of lenders are requiring landlords using limited company buy-to-let properties to provide large personal guarantees as a condition of their mortgages, meaning that their personal property can be used if the landlord falls into arrears.

In 2022, lenders' personal guarantee requirements for limited company buy-to-let mortgages rise to around £509,000.


Analysis by Purbeck Personal Guarantee Insurance shows that this is a significant 55 per cent increase from around £328,000 in 2021.


The average amount of a buy-to-let mortgage for limited companies has fallen from just over £1.1m in 2021 to £948,000 in 2022, suggesting that lenders are asking for a larger proportion of the mortgage to be used as security.

Lenders requiring more personal guarantees from buy-to-let landlords

Todd Davison, managing director of Personal Guarantee Insurance at Purbeck, says: Around 40 per cent of buy-to-let mortgages are structured as limited companies, and this proportion is expected to increase according to industry research.


However, research by Capital Economics suggests that rental income is being eroded by rising costs, which can lead to losses and forced sales.


It is therefore important that landlords seek professional advice, fully understand the risks of signing a personal guarantee and take steps to mitigate these risks before accepting a buy-to-let mortgage from a limited company.


Personal guarantee insurance is a tried and tested method, but there are other steps such as shared guarantees.

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Lenders requiring more personal guarantees from buy-to-let landlords
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