Limited Company Director Mortgages
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What are Limited Company Director Mortgages?
Is it possible to get a mortgage as a Limited Company Director?
Much like other Self-Employed applicants, Limited Company Directors have access to the same mortgage products as those in more traditional employment. All Self-Employed applicants can experience more of a challenging application process, however, in recent years lenders are becoming more flexible, with some specialising in mortgages specifically for the Self-Employed.
As a Limited Company Director it’s important to be aware of all of your options, speaking to authorised and regulated advisers, like ourselves, can help you to access those specialist lenders more willing to consider your circumstances. Thorough preparation in advance of your application can also ensure a smoother process.
How do I document my trading history?
It’s important to keep accurate and up-to-date business records and accounts in relation to your company, as this is likely to be required as evidence of income when you apply for a mortgage. Each mortgage lender will have its own acceptance criteria and therefore exact requirements will differ, but the majority will expect you to be able to prove that your business has operated for two to three years.
Some of the more specialist lenders for Self-Employed mortgage applicants are willing to consider those with as little as twelve months worth of accounts, however, to access more competitive interest rates, delaying your application until you have a solid two to three year’s worth of accounts history, could be beneficial.
What will lenders consider as income?
The main difference for Self-Employed applicants is how their application is assessed and the loan is calculated. What type of business you operate will slightly alter how your annual income and therefore, affordability is determined.
For Limited Company Directors, affordability is generally determined by calculating an average of your last two to three year’s worth of salary and dividends.
How do I prove my income?
In order to prove your salary and dividends payments for the duration requested by the lender (usually two to three years, but can vary) you will need to provide the following:
- Accounts for the relevant years, signed off by a qualified accountant
- SA302 forms for the same years
- A tax overview from HMRC coving the same period
- Business bank statements may be requested, as well as overall business profits – this is to ensure that the business can maintain your salary and dividends at the current rate, going forwards
PAYE
If you receive a salary payslip from your own business, this is not considered a suitable form of evidence. SA302 forms will be used to determine your salary information and all Mortgage Lenders are likely to require these.
Dividends
Assuming that they do not exceed your net business profits, your dividends payments will be considered alongside your salary when calculating affordability.
Retained profit
Contrary to common business practice, profit retention in the run-up to a mortgage application does not offer optimum benefit to your application. If possible, consider drawing more dividends from the business profits in the years prior to your mortgage application, in order to maximise affordability.
What If I have fluctuating income?
Minor fluctuations in income are standard to most Self-Employed applicants and lenders use an average of a defined number of years to try and balance this out. Fluctuating income shouldn’t pose too many issues unless the difference between each year is substantial or you have a continued downward trend in your income. When earnings have continuously decreased over time, only the most recent year’s figures will be used to calculate your loan .
What deposit will I need?
Self-Employed applicants won’t usually need to pay a higher deposit than the average mortgage applicant.
Offering a larger deposit can improve your chances of securing a mortgage, especially those applicants who have struggled with adverse credit in the past. It also opens up a wider range of lenders with more competitive rates, so if you can afford to do so, it will certainly be beneficial.
How can Vivid Mortgages help?
At Vivid Mortgages, we regularly help Limited Company directors and other Self-Employed applicants to find those specialist lenders who are more flexible to your employment type. Our Mortgage Brokers can ensure that you find the most suitable mortgage product, at the best rate to suit your circumstances. Our goal is to save you time, money and help you to get the most benefit out of your mortgage.
Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.
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- Over 30 years experience in the industry
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Carly Breathwick CeMap
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Soma Egan
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