Limited Company Director Mortgage
Limited Company Director Mortgage – what’s involved?
Getting a mortgage as a Limited Company Director can present a few challenges – but as long as you know what to look out for it should be easy enough to get a suitable deal. Mortgage Advisors like the team at Assured can take the strain and compare all the options.
Can I get a Mortgage if I am a Limited Company Director?
Most lenders are very accepting of small business owners and Self-Employed people. Getting the mortgage is no problem, but it is sometimes a challenge to borrow as much as you believe is fair.
As you may know, Mortgage Lenders base the loan amount on your income and will typically lend four to five times your annual earnings. The issue comes when, as a Company Director, you pay yourself a low salary for tax reasons.
Many lenders only consider your official ‘salary’ as your income, while others will combine your salary and dividends. If you tend to leave profits in your business, that could mean your loan amount is less than you hoped.
However, there are a number of mortgage providers who understand small businesses. They will look at salary, dividends and net profit to calculate your loan – usually meaning you can borrow more.
How do I prove my income?
As we’ve already seen, lenders take different approaches to assessing your income. They might include:
- Director’s salary
- Tax return
- Trading history
- Operating profit (before or after tax)
- Other applicants employed by the company
You will prove your income by supplying various documents. Self-Employed applicants usually need to give the lender copies of their tax returns, while Company Directors often provide two to three years’ accounts.
How do I document my trading history?
When you are applying for a mortgage, some providers will ask for details of your company’s trading history to give them an insight into how your business is doing.
Typical requests might include:
- Two or three years’ certified company accounts
- Self assessment forms (SA302)
- Tax year overviews
- A statement from a certified accountant
- Three months of personal and/or business bank statements
Remember that lenders will also examine your credit record. Bad credit won’t necessarily mean you can’t get a mortgage, but it will restrict your choice of lenders and often means higher mortgage rates. You may need to find specialist lenders who both welcome company owners and allow for previous debt issues.
Is fluctuating income an issue?
There are two levels of fluctuating income – in the amount you take from the business from month to month, and also the income the business receives.
A certain amount of fluctuation is normal in a small business. Revenues can rise and fall and some years are more profitable than others. This is partly why lenders want to see two to three years’ worth of business records, to get a sense of fluctuation and take an average performance.
They may look at both business income and your salary. You may need to explain any big variations in the sums you have taken out of your business and any drop in profits.
Any loss on your accounts could cause concern, so you may need to explain the details and the plans you have in place for recovery.
How much deposit will I need?
The growing availability of 95% mortgages mean that you can buy a home with just a 5% deposit, but you will need good credit for these and they have higher interest rates. As a rule, if you can contribute a larger deposit, you gain more choice of lenders and more competitive rates. A deposit worth 20% or more of the asking price will unlock better deals.
How can a Mortgage Broker help with Company Director mortgages?
It takes a fair amount of research to find good Limited Company Director Mortgage deals – and that is what Mortgage Brokers are here for. We explore your situation to take an informed look at suitable mortgage products across the market – including both high street lenders and many providers who only sell through Mortgage Advisers.
We’ll recommend potential options that match your needs, and then support you through the mortgage application. Our customers include sole traders, company directors and partnerships and we will make sure you have all the relevant documents ready in advance.
Assured is authorised and regulated by the Financial Conduct Authority. Contact our registered office today for a free introductory consultation.