Buy-To-Let Mortgages and Personal Guarantees – What You Need to Know

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Buy-To-Let Mortgages and Personal Guarantees – What You Need to Know

Most landlords using limited companies to borrow in 2025 will encounter the requirement to sign a personal guarantee (PG). Even though the borrowing is through a Special Purpose Vehicle (SPV), lenders want additional security that ties directors and shareholders personally to the loan. For landlords, understanding how PGs work – and the risks involved – is vital before signing on the dotted line.

What Is a Personal Guarantee?

A personal guarantee is a legal commitment by an individual to repay a loan if the borrowing company defaults. In practice, this means that even if the property company is the borrower, the lender can pursue the directors or guarantors personally if the company fails to meet obligations.

Personal guarantees usually cover the full amount of the borrowing plus interest and costs. They are a standard feature of almost all limited company buy-to-let mortgages.

Why Do Lenders Require Personal Guarantees?

• Risk mitigation – PGs give lenders an extra safety net beyond the property itself.
• Alignment of interests – lenders want to ensure directors remain personally invested in the success of the venture.
• Regulatory caution – lenders are expected to apply rigorous underwriting to buy-to-let, especially after the PRA rules of 2017.

Without PGs, many lenders would simply refuse to lend to SPVs, which would dramatically reduce financing options for landlords.

Risks for Landlords

By signing a PG, you extend your liability beyond the company structure. Risks include:

• Personal assets at risk – lenders can pursue guarantors’ personal wealth if the company defaults.
• Joint guarantees – where multiple directors sign, liability is often “joint and several”, meaning the lender can pursue one guarantor for the full amount.
• Inheritance implications – PG obligations can pass to estates, complicating succession planning.
• Difficulty exiting – once signed, PGs remain in force until the loan is repaid or refinanced.

Case Study: PG Liability in Practice

Scenario: Two directors borrowed £1m through an SPV. Both signed PGs. When the company defaulted, the lender pursued Director A for the full amount, even though Director B had greater personal wealth.

Outcome: Director A was forced to sell personal assets before later recovering contributions from Director B through legal action. This highlighted the risk of joint and several liability.

Can You Limit PG Exposure?

While most buy-to-let lenders require full PGs, some limited mitigations are possible:

• PG caps – a small number of lenders allow capped guarantees, usually in commercial rather than buy-to-let finance.
• Insurance – specialist PG insurance exists, though premiums can be high and cover is not always comprehensive.
• Negotiation – in rare cases, strong borrowers may negotiate partial PGs, but this is unusual in 2025.

In practice, landlords should assume PGs are unavoidable for SPV borrowing and plan accordingly.

Practical Tips for Landlords

• Always read the PG document carefully and take legal advice before signing.
• Ensure all directors and shareholders understand their obligations under joint and several liability.
• Maintain liquidity buffers to reduce the risk of default.
• Consider life cover written into trust to mitigate the risk of PG liability passing to heirs.
• Factor PG obligations into your wider succession and estate planning.

Final Thoughts

Personal guarantees are a fact of life for most landlords borrowing through limited companies in 2025. They give lenders confidence but increase landlord risk. The best approach is to understand the obligations fully, structure borrowing sensibly, and plan personal finances to manage potential exposure.

Speak to Our Sponsor

Our sponsor helps landlords understand PG obligations, explore insurance options where available, and structure portfolios to minimise personal risk while maintaining borrowing power.

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Publication date: Monday, 29 December 2025

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