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Landlords Cautioned on Personal Guarantee Hazards as Average BTL Mortgage Dips to £895k

With a downtrend in buy to let mortgage rates and a surge in the adoption of limited company buy to let mortgages, Purbeck Personal Guarantee Insurance is sounding the alarm for Professional Landlords. They stress the importance of understanding the implications of personal guarantees often associated with such mortgages.

Purbeck’s recent analysis highlighted that the average limited company buy to let mortgage stood at £948k in 2022. This number has decreased to an average of £895k in 2023.

Updated figures from 2023 indicate a rising preference for limited company structures in buy-to-let purchases in England and Wales, with 74% making this choice, up from 68% in 2022. This shift is largely attributed to interest rate increases that have impacted landlords’ income.

The inherent issue is that many professional landlords obtaining limited company buy to let mortgages are frequently required to provide a personal guarantee, putting their personal assets in jeopardy. This has led Purbeck to emphasise the necessity for landlords to fully recognise this risk before proceeding.

Todd Davison, MD of Purbeck Personal Guarantee Insurance, stated, “A Personal Guarantee gives the mortgage lender the right to seize assets from the professional landlord’s personal estate such as their home, car and money in their personal bank account, should the landlord fall into arrears and there is a shortfall following property repossession by the bank. This is a nightmare scenario and precisely why some more savvy landlords have been approaching us for insurance protection. This has led to the launch of the first personal guarantee insurance protection for professional landlords from Purbeck.”

He added, “Buy to let mortgages in limited company status have their tax advantages but they can also pose a big personal risk to a landlord. Professional advice before signing a mortgage agreement is key and given the uncertainty in the property market it is vital landlords consider how to reduce the risk of signing a personal guarantee such as through Personal Guarantee Insurance.”

Additionally, Purbeck’s Professional Landlord PGI promises to cover up to 80% of an outstanding mortgage if landlords find themselves in arrears and the lender pursues property recovery. An integral aspect of this insurance solution is access to Purbeck’s Support Desk, which aids professional landlords facing financial difficulties by offering expert financial guidance and mentoring to prevent property repossession.