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Mortgages For Limited Company Directors
Running your own business as a Limited Company Director means your income is dependent on the amount of profit your business generates. When applying for a property loan, a mortgage lender will need assurance that you’ll be able to afford the repayments on your mortgage now and in the long run.
Here’s what you need to know about Mortgages For Limited Company Directors, and how to go about proving your income and stability as a Self-Employed mortgage applicant.
Can I get a mortgage as a Limited Company Director?
Yes you can, and there are ways to go about applying for a company director mortgage that will take up less of your time and effort and guarantee success. First of all, find a Mortgage Broker that has plenty of experience helping other limited company directors.
A well-established Mortgage Broker has the tools to research a wider range of mortgage providers, over and above the usual high street lenders. They have inside market knowledge, so they know which specialist lenders to approach on your behalf. And, because they run a business themselves, they’ll know exactly which documents you’ll need to prove your income and affordability.
Choosing the right Mortgage Adviser at the start of your journey will increase your chances of securing a mortgage offer. Make sure the Mortgage Adviser or the appointed representative you approach has a great reputation, like Mortgages by McAteer, a registered office in England and is authorised and regulated by the Financial Conduct Authority (FCA).
How do I document my trading history?
First off, a mortgage lender will expect you to have been trading for two years or more. The most important documents you’ll be asked to provide to show your business is a going concern, are two years’ of finalised limited company accounts, as a minimum.
These sets of accounts must be recent, for the latest closed tax year. If you’re applying for a mortgage just before the tax year closes, a lender may consider your current trading year as additional proof.
Bring your accountant on board early so they have time to get your latest sets of accounts ready to submit. Your accountant can also prepare a letter of reference that states your business profile is sound.
Here’s a shortlist of the documents you’ll need to have to hand. An experienced Mortgage Broker will give you guidance on anything else a lender may ask for.
- Finalised limited company accounts – minimum two years’ worth.
- A lender will be interested in your operating and retained (net profit), so ask your accountant to explain this when you receive your accounts
- Last three months’ worth of business bank statements – to show money flowing in and out of your business
- Reference from your accountant
- Business Credit reference
What if my business income fluctuates?
Your business trading style may not be the same throughout the year particularly if you have key customer buying periods followed by quieter months. If this is the case, tell your Mortgage Broker at the outset.
They will be able to relay this information to the lender who will then calculate an average of your income across your trading year.
What about proving my income?
As a Limited Company Director, you will usually pay yourself a basic salary up to the £12,570 basic tax threshold – so have recent copies of your director’s PAYE payslips available.
It’s common to draw dividends from your profits. Lenders like to see a consistent flow of income into your personal bank account so they know you have the funds to make regular monthly mortgage payments.
The more dividend you take, the more you’ll be able to borrow. Ask your accountant for dividend slips to prove how much you’ve taken during the last tax year.
Some specialist lenders consider profits retained in the business as potential income, whereas some discount it as they consider it money earmarked for business use. You can explain your intentions for any retained profit.
If you earn other income from Buy to Let property or other Self-Employed work not linked to your limited company, you’ll need to produce self-assessment accounts. Your HMRC SA302 form will be proof of the amount of personal income you earned and how much tax you paid.
Your lender will ask their underwriter to evaluate the risk of your loan to make sure you can afford to repay the mortgage. To do this they will:
- Measure your application against your credit history
- Assess how well you repay other loans
- Check you meet their loan criteria
- Read all your documents to make sure they are signed and in order
A qualified Mortgage Broker will make the underwriter’s job easier by ensuring your application meets their criteria before submitting it. If you have adverse credit on your credit report, you can help by clearing outstanding debit.
What deposit will I need?
Having a larger deposit will improve your chances of securing a great mortgage offer and favourable interest rate. Aiming for 20% of the purchase price is a good baseline to aim for.
If this is out of reach, but your other credentials stack up well, lower deposits will be considered.
How can Mortgages by McAteer help?
We’re used to helping Limited Company Directors secure great mortgages with minimum effort. Talking to us about the property you want to buy or remortgage means you’ll get a head start. To help, we:
- do all the searching to find the most favourable lender to suit you;
- complete and submit your mortgage application and liaise with the lender on your behalf to save you time;
- talk you through all the terms and conditions; and
- give you guidance on other things like life protection and insurance.d
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE