New analysis of personal guarantee requests from lenders for Limited Company Buy to Let Mortgages, has found that the average personal guarantee requirement was circa £509k in 2022, up 55% from circa £328k in 2021.
Professional Landlords using Limited Company Buy to Let Mortgages are commonly asked to sign a personal guarantee as a condition of the mortgage. This provides the lender with direct recourse to the professional landlord’s personal estate should the landlord fall into arrears and there is a shortfall following property repossession by the bank.
Purbeck Personal Guarantee Insurance analysis also shows that the average Limited Company Buy to Let Mortgage amount fell from over £1.1m in 2021 to £948k in 2022, suggesting lenders are asking for a bigger slice of the mortgage as security in the form of a personal guarantee.
Todd Davison, MD of Purbeck Personal Guarantee Insurance said: “Around 40% of buy-to-let mortgages are in a limited company structure and this is expected to grow based on industry research. However, research by Capital Economics suggests rental income is being eroded by rising costs which may lead to arears and forced sales.
"It is therefore vital that landlords seek professional advice before taking on a Limited Company Buy to Let Mortgage, fully understand the risks of signing a personal guarantee and take steps to reduce those risks. Personal Guarantee Insurance is one proven way, but there are additional steps too such as sharing the guarantee.
He concludes: “Purbeck has supported over 2,000 directors on over £275million of Personal Guarantee commitments over the past 6 years in respect of business loans. Responding to the growing interest we have received from Professional Landlords, we are delighted that we can now offer Purbeck Professional Landlord PGI. This will offer some certainty that a Landlord’s personal finances will be protected as they navigate the tricky waters ahead.”
