Borrowing in a Company Name Changes How Lenders See the Loan
When you borrow in a company name, lenders treat the application as a commercial loan rather than a residential mortgage, even when the property is a house or unit. That classification affects interest rates, deposit requirements, and the information you need to provide.
Most banks require the property to be genuinely held for investment purposes and will ask for evidence of the company's financial position, including recent tax returns, profit and loss statements, and balance sheets. If the company is newly established or has limited trading history, personal guarantees from directors are almost always required. Lenders assess the company's ability to service the debt and the financial strength of the guarantors, so both layers matter.
Consider an investor who sets up a company to purchase a unit near the Toronto foreshore. The company has been operating for 18 months with some rental income from an existing property. The lender assesses the company's rental income and trading history, then requires both directors to provide personal financial statements and sign guarantees. The loan is approved at a rate 0.4 percentage points higher than a comparable residential investor loan and requires a 30 per cent deposit rather than the 20 per cent that would apply to a loan in a personal name. The directors remain personally liable if the company defaults, but the property is held in the company structure.
Why Toronto Investors Choose a Company Structure
The most common reason is tax planning and asset protection. A company structure allows investors to cap the tax rate on rental income at the company tax rate, which can be lower than the marginal rate for high-income earners. Companies also provide a clearer separation between personal and investment assets, which matters if the portfolio grows or if the investor wants to bring in other shareholders later.
Another reason is succession planning. Shares in a company can be transferred without triggering a change in property ownership, which can reduce future costs and administrative work when passing assets to family members or bringing in business partners.
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Interest Rates and Loan Features When Borrowing as a Company
Interest rates on company loans sit above standard investment loans but below most business lending. Rates are typically 0.3 to 0.6 percentage points higher than a residential investor loan at the same loan-to-value ratio, depending on the lender and the strength of the company's financials.
Interest-only periods are available, usually for up to five years, and most lenders allow variable or fixed rate options. Offset accounts are less common on company loans, though some lenders will attach a transaction account to the loan. Redraw facilities are more widely available but often come with conditions around minimum withdrawal amounts.
Some lenders will cap the loan-to-value ratio at 70 or 75 per cent for company borrowers, particularly if the company is recently established or the directors have limited property investment experience. That means you need a larger deposit compared to borrowing in your own name, where an 80 per cent loan-to-value ratio is standard for established investors.
Deposit Requirements and Lenders Mortgage Insurance
Most lenders require a minimum 20 per cent deposit when lending to a company, and many prefer 30 per cent. Lenders mortgage insurance is rarely available for company borrowers, so if you cannot meet the lender's maximum loan-to-value ratio without insurance, you will need to increase your deposit or look for a lender with a higher threshold.
The deposit can be funded by cash savings held in the company, director contributions recorded as loans to the company, or equity from other properties held by the company or the directors personally. If you are using equity from a personally held property, the lender will assess both the company loan and any increase in personal borrowing as part of the overall application.
In a scenario where a Toronto couple wants to buy a second investment property through their company, they have $80,000 in the company's bank account and access to $120,000 in equity from their home. The lender accepts a combination of both sources to meet the 30 per cent deposit and associated costs, but the couple's personal borrowing capacity is reduced because they are guaranteeing the company loan.
Tax Treatment Under the New Negative Gearing Rules
From the 2027-28 income year, losses on established residential investment properties acquired after 12 May 2026 can only be offset against income from other residential properties. That rule applies to individuals, partnerships, companies, and most trusts. Companies are not exempt.
If your company buys an established property and runs at a loss in the early years, that loss can be carried forward and used against future rental income or capital gains from residential property. It cannot be offset against the company's other income or against the directors' personal income. The loss stays within the company structure.
If you buy an eligible new build through the company, the old negative gearing rules continue to apply. The loss can be offset against the company's other income, which may include income from non-property sources if the company has a broader trading purpose. New builds need to meet specific criteria to qualify, including being constructed on vacant land or adding to the total number of dwellings on the site.
How Lenders Assess Serviceability for Company Borrowers
Lenders assess the company's ability to service the loan using the rental income from the property, any other income earned by the company, and sometimes a portion of the directors' personal income if guarantees are in place. The rental income is usually shaded by 20 per cent to account for vacancies and periods between tenants, particularly in areas like Toronto where the vacancy rate can fluctuate with seasonal demand near the lake.
Interest rate buffers apply just as they do for personal borrowers. The lender tests the loan at a rate at least 3 percentage points above the actual rate, meaning the company needs to demonstrate it can service the loan even if rates rise. If the company's income is insufficient, the guarantors' personal income and expenses are brought into the assessment.
Debt-to-income limits that apply to residential borrowers do not directly apply to company loans, because those loans sit outside the residential lending portfolio. That can sometimes make it easier to borrow a higher amount relative to income when using a company structure, provided the lender is satisfied with the overall risk.
When a Company Structure Does Not Suit Your Situation
A company structure adds cost and complexity. You will pay higher interest rates, need a larger deposit, and face ongoing costs including annual ASIC fees, tax return preparation, and potentially accounting fees for financial statements. If you are buying your first investment property with a modest deposit and limited rental income, borrowing in your personal name will almost always be more practical and more affordable.
Companies also do not receive the 50 per cent capital gains tax discount that applies to individuals. When the company sells the property, the full capital gain is taxed at the company rate. For properties held long-term, that difference can outweigh the benefit of the lower income tax rate on rental income during the holding period.
If your primary goal is to build a portfolio of residential properties without any trading activity or complex ownership arrangements, a trust structure or personal ownership will usually deliver lower costs and more flexibility with refinancing down the track.
Getting the Structure Right Before You Apply
If you are considering a company structure, talk through the tax and legal side with an accountant or solicitor who works with property investors before you lodge a loan application. Lenders want to see that the structure is set up properly, that the company has an appropriate constitution, and that the directors understand their obligations under the guarantee.
Some lenders are more active in the company investment loan space than others, and the rate and deposit differences between lenders can be significant. Access to the right lender makes a material difference to the interest rate, loan-to-value ratio, and loan features you can secure. We work with investors across Toronto and connect you with lenders who understand company structures and price those loans competitively.
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Frequently Asked Questions
Can I borrow in a company name for an investment property in Toronto?
Yes, but lenders treat the loan as a commercial loan rather than a residential mortgage. You will need a larger deposit, usually 20 to 30 per cent, and the interest rate will be higher than a standard investment loan. Personal guarantees from directors are almost always required.
Do the new negative gearing rules apply to companies?
Yes, from the 2027-28 income year, losses on established residential investment properties acquired after 12 May 2026 can only be offset against other residential property income, even when held in a company. Losses can be carried forward but cannot be used against the company's other income unless the property is an eligible new build.
What deposit do I need when borrowing in a company name?
Most lenders require a minimum 20 per cent deposit, and many prefer 30 per cent. Lenders mortgage insurance is rarely available for company borrowers, so you need to meet the lender's loan-to-value ratio without it.
Are interest rates higher when borrowing as a company?
Yes, interest rates on company investment loans are typically 0.3 to 0.6 percentage points higher than residential investor loans at the same loan-to-value ratio. The rate depends on the lender, the company's financial position, and the strength of the guarantors.
Do I still need to provide a personal guarantee if I borrow in a company name?
Yes, almost all lenders require directors to provide personal guarantees when lending to a company for property investment. The guarantee means you remain personally liable if the company cannot meet its loan obligations.
