Do I Always Need to Sign A Personal Guarantee With My Buy to Let Mortgage?

A question I'm often asked is whether it's necessary to give a personal guarantee with a buy to let mortgage.

In fact it's often put as a statement rather than a question along the lines of “If I need to give a personal guarantee then I don't want to apply for a mortgage”.

So I can see that there is quite a lot of confusion around this issue and I thought it might be good to talk about it and my experiences.
The general rule is that if you take out a buy to let mortgage through a limited company, you as director and/or shareholder will be required to give a personal guarantee, a PG.

Why is that?

Because some investors naively assume that if they buy a property into a limited company, the limited company affords them full protection and, taken to its extreme, some more dubious investors assume that they don't need to pay back the mortgage because they, personally will be protected by the limited company structure. In other words, if their Limited Company defaults, they can shrug their shoulders and say “Well, it’s nothing to do with me”.
Clearly that would be a ridiculous situation.

Obviously, no lender is going to want that to happen and they are not going to allow that to happen.

So the way they protect themselves is to make sure that there is a personal guarantee in place provided by the directors/shareholders.

Many lenders require them only from the directors, some want non-director shareholders to sign as well.

Anyway, I go into it all in the video, so please take a look.

Here's to Successful Property investing.

Peter
Peter Jones
(ex) Chartered Surveyor, author and property investor
http://www.ThePropertyTeacher.co.uk

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