Limited Company Director Mortgage
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Can I get a mortgage as a Limited Company Director?
Limited Company Directors, as Self-Employed applicants, will need to provide evidence of a longer period of a stable income than an employed person, however, there are many Mortgage Lenders willing to offer mortgages to Self-Employed applicants, whether you’re a Limited Company Director, Sole Trader or Freelancer.
Although there is some stigma surrounding the difficult Self-Employed mortgage applicants have in securing a mortgage, the key is finding a lender whose acceptance criteria closely matches your circumstances and financial preparation.
How do I document my trading history?
Mortgage Lenders will need to be satisfied that you can evidence stable income over at least two to three years of trading history and are likely to maintain this in the long term, so that you will continue to be able to afford the repayments on your mortgage.
It is possible to obtain a mortgage from some specialist lenders if you’ve only traded for a year, however, this will be more difficult and the mortgage rates are going to be higher, to reflect the extra risk the lender is taking.
Whatever length of trading history you are required to evidence, the proof required will include your certified accounts, SA302 tax returns and bank statements. Those with less accounting history or less stable incomes may have to provide additional support to their application, such as income projections and plans for business expansion.
What will count as income?
An average figure calculated from your most recent two to three years of personal salary and dividends payments will be considered in support of your application.
There are some lenders who will also consider your net profits alongside your personal income, however, this is fairly rare.
How do I prove my income?
All lenders have different criteria when it comes to how they assess mortgage applications, so the length of accounting history and documents required can vary to some degree, however, the most likely scenario is that you will need to provide:
- Two to three years of certified accounts
- SA302 forms for the same period
- A HMRC tax overview covering these trading years
- Business banking statements
Many Limited Company Directors will take a salary from their own company, however, where this is the case, it’s not considered to be PAYE income and your payslips will not be suitable evidence of income.
SA302 or bank statements should evidence your dividend payments. As lenders are more likely to include dividends than retained profits, it may be beneficial to draw down more in the years preceding your mortgage application.
Those niche lenders who are willing to consider your retained business profits will be more difficult to find, although they may be beneficial for some applications. This type of application can be a complex and it’s often easier for the Mortgage Lender to deal directly with your accountant.
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What if I have fluctuating income?
The vast majority of business owners will experience fluctuations in income. Lenders use an average figure of the past two to three years for this precise reason, as it gives a more accurate reflection of your true long term income.
If your personal income or business profits show a continuous decline over the past few years, however, most lenders will only be willing to consider your most recent year’s income.
How much will I be able to borrow?
A typical mortgage applicant can expect to borrow between three and five times their annual income. Whether you can borrow higher or lower on this scale will vary, based on the following:
- Your current credit score
- The length of your trading history
- Total annual income
- Existing financial responsibilities and outgoings
What deposit will I need?
When you apply for a mortgage on a standard residential property, you will need to provide a minimum of 10% deposit, unless you use a home ownership scheme, when it can be possible to buy a home with a little as 5% deposit.
Being Self-Employed doesn’t mean that you will be asked for a larger deposit, however, you may benefit from offering one, if affordable, particularly if you have a shorter trading history or poor credit history.
Offering a larger deposit can increase your chance of being accepted for a mortgage and also give you access to better interest rates and a wider selection of mortgage products.
How can The Mortgage Company help?
At The Mortgage Company, our Mortgage Brokers specialise in mortgages for Limited Company Directors. Having access to a range of mortgage products from across the mortgage industry, we can find deals for Self-Employed applicants that won’t be available from high street lenders.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE