Hey it’s Dr Ro, apologies about the noise the builders are on site here and I wanted to do a quick video for you.
I’m about to head down to the solicitors to do some refinancing on a couple of my properties that are owned through a limited company. I wanted to tackle this subject briefly and you will need to take some advice on this personally.
If you are doing refinancing at the moment there’s a lot of changes happening just with the way the banks operate and information they require from you. Owning a property in your name has very different tax implications to owning a property in a limited company.
I’m not here to give you advice on whether you need to speak to an accountant or tax specialist to give you some specific advice on that. But there are tax benefits to owning property in a limited company, again you will need to speak to an accountant about that to get advice on it.
If you own properties in your own name and you’re doing a refinance the process is actually a lot simpler at the moment, in terms of the paperwork, signing the paperwork, witness of the paperwork, signing of the mortgage deeds, etcetera that is relatively straightforward. Assuming that you’re working with a really good broker.
With a limited company on the other hand it’s a more drawn out process. So, for example, I’m just going at the moment to my solicitor and what I’m having to take with me is the mortgage guarantee, the mortgage deed, I have also got some paperwork which includes the mortgage offer. But there’s also board meetings for the directors of the company all who are actually confirming that we are happy to do it.
And this is whether you’re the director of the company or whether there are several directors of the company ultimately the board meeting has to say, we as directors are happy to go through refinance with this lender.
You normally have to state the lender, the amount of money that the lender is lending you and the address of the property and the minutes have to have a date on them and it is confirmation that you are of sound mind and you have made that decision together. And they have to be kept as a record and actually you’ll need to take that with you to show the solicitor as well.
In the old days it was a lot quicker and it’s not to say it isn’t quick, it’s still relatively quick compared to say somebody getting a mortgage in their own name. If you’ve got a mortgage in your own name it is a much slower process. I personally feel going from refinance or mortgage on a buy to let or HMO for example.
It’s not as though you’re just rocking up now to a solicitor with a single piece of paper, he’s also got to witness me sign off on the guarantee paperwork as well. So that means that I’m paying additional lawyer fees that I wouldn’t have to pay refinancing on any properties I’ve got in my name. I do still have some properties in my portfolio that are in my name, but equally any properties that are in a company name and I’m doing a refinance what then happens is, I take that to the solicitor I sit down with him or her, I present them with the deed, mortgage offer, mortgage guarantee and on top of all of that any paperwork I need to take with me.
And state then there is a fee attached to that. It won’t be a quick £50, £100 fix it could be a lot more than that. It could be £200 to £300 or more, depending on the solicitor you’re using, the scale of the project, size of the mortgage and the complexity of the deal as well. So again be mindful of all these things because for a lot of people when they’re doing refinancing they don’t take these costs into account and it’s important to allow for that as well.
Sometimes if you look at a re-mortgage the amount you’re putting out has to be enough to justify going through the process and also to allow you to reduce your money in the deal to increase your return on investment. These are numbers I can do with you on a separate occasion and I might get a flip chart up and do some stuff on the wall to show you how I would typically do that.
Again, if you’ve not done a refinance on a limited company and you think I’m just going to go in, do a quick refinance and off I go. Just be aware that it isn’t as quick as it would be if it was in your name. It’s not as quick as it would have been in the old days, you’ve got to find an independent lawyer to do this for you. You’ve got to find yourself a solicitor that knows you, you have a relationship with them and if you don’t have a relationship with them and they don’t know you they have to get proof of who you are. You’re going to have to bring your passport with you, proof of address.
All those things are very common, but if you’re brand-new to the solicitor you’ll have to go through the process. The more refinances you do with this solicitor the easier it will be because they know you, they’ve sat down with you before, they know you’re familiar with it so they’ll go through it in a smoother way. Not necessarily quicker but a smoother way.
Ultimately you’re signing on the dotted line, once that paperwork is done, one or two things can happen. One is they will photocopy it and send it off because what I’ve got here is one solicitor doing the refinancing, I’ve then got an independent solicitor I’m going to that I have to go through an independent advice with my guarantee to say yes, I understand the risk etcetera.
I’ve got two sets of legal fees; I’ve got the refinancing fees and I’ve got the separate fee of going through witnessing and all of the paperwork as well. It’s not just the refinancing legal fees it’s a separate set of fees you’re going to have to have.
I just want you to be aware of this and if you haven’t set this up and you’re thinking, great I’ll get this over the line and you’re refinancing and your lawyer says, you need to find an independent lawyer and you go where do I find one? Then it might be a bit of a journey to do that.
Some solicitors will do it over Facetime with you if they’re familiar with you. Hopefully that’s useful, the main message was to make sure you’re aware it isn’t as quick as you might think as if you were doing it in your own name. If you plan for it, it will be efficient but just be mindful there is more paperwork, it’s more complex in a limited company than it would be if it was in your own name.
Dr Ro signing out.
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