Mortgages for company directors
Updated 19th September 2020
Mortgages for company directors is really where our experts come into their own. With vastly wide-ranging criteria across high street lenders, its difficult to get mortgages for a company director. Many customers come to us after being turned down by their bank.
Our mortgage experts will give you the best chance to get accepted for a mortgage for a company director, If it’s possible our experts can help, and if it not, they will outline the reasons why. They will work with you and put a plan of action in place to outline how to achieve your goals.
4 main areas that can affect lending are.
- Length of trading time.
- Retained profits – keeping money in the company. instead of taking dividends.
- Latest years figures – using the latest years and not an average of the last 2 or 3 years.
- Shareholding – what percentage of shareholding you have.
I’m a self-employed limited company director can I get a mortgage?
The way you declare your income is different to someone who is employed, lenders will want to see either.
- Tax calculations & tax year overviews
- Certified company accounts
- Accountants certificate.
If you own more than 25% of the shareholding you will be classed as self-employed and will be treated accordingly. Some lenders will treat you as employed if you own less than 30% shareholding.
How long does my business need to have been trading to get a mortgage?
Minimum 12 months history will be required by a specialist lender. Most high street lenders will be looking for 2-3 years of trading history. Specialist lenders will work off 12 months trading history. Due to the increased risk the minimum deposit level for this is 15%.
Certain professionals will be eligible with less history, such as a doctor who may have joined a practice which is already operational. There are options where a lender would take 1 year’s accounts and a projection from the accountant.
When you are setting up a new company, you can check the availability of the company name by clicking here
What income can I use when I am self-employed?
Most accountants will advise to take a salary up to the tax threshold and then dividends for any other income. The reason for this is to reduce the amount of tax to be paid. However, some directors will take all earns as PAYE.
Dividends are subject to lower tax liability than employed income. This is the way most company directors show their income and is the most widely used method by mortgage lenders to calculate affordability.
Certain specialist lenders will work from profits retained in the business. However, they will generally only look back at the previous 12 months history. This can significantly increase the borrowing potential for self-employed company directors. Your mortgage expert will be able to guide you through this process and get you the maximum borrowing available for your circumstances.
How much deposit will a company director need?
Every self-employed mortgage will be assessed on its own merits, and the amount of deposit will therefore vary depending on the factors.
- Time company has been trading.
- Credit profile of the applicant.
- Property price.
The deals available will be the same regardless if you are employed or self-employed, and as with any application the more deposit you have the stronger the case will look to a lender.
As a rule, if you’ve been trading for 12 months then you will need a minimum of 15% deposit, if you have been trading 2 years or more there are options at 10% if your credit profile is strong enough.
If you have a 5% deposit and a first time buyer, you may have options on the Help to Buy scheme.
For the latest criteria speak to one of our mortgage experts on 0300 124 5655
Can i get a mortgage for a company director with adverse credit?
Yes, it’s possible and will be assessed on how severe & recent your adverse credit is, this is the same if you’re employed or self-employed. The more severe the adverse, the more deposit will be required by the lender and the higher the interest rate will be.
Can I borrow more using my latest years self-employed figures?
Companies can at times file low profits for any number of reasons such as set up costs in the first year of trading, or investment in new plant/machinery to expand a business. This can hugely affect a director borrowing potential through a lender who averages over 2 or 3 years worth of accounts.
Some specialist lenders can work off the latest year’s figures, however there will need to be a rational explanation to why there have been lower figures in the previous year’s trading. The accountant can normally provide any information the lender may request through an accountant’s reference Let’s have a look at an example below and use a multiple of 5 x income.£15,000.
- First year profit £15,000
- Second year profit £20,000.
- Third year profit £40,000.
Mainstream Lender £23.333 x 5 = £116,666 Average of the last 3 years profits.
Mainstream Lender £30,000 x 5 = £150,000 Average of the last 2 years profits.
Specialist lender £40,000 x 5 = £200,000 Latest years profits.
You can see the difference using the correct the lender could have on your potential borrowing.
Self-employed mortgage for company directors are complicated and need experienced and expert advice. This will ensure you get the borrowing you require at the best possible rate, and that your application is presented in the best way possible to the lender.
Speak to a company director mortgage advisor.
There are many lenders available ranging from high street to specialist lenders. Most people go to their own bank, get declined or can’t borrow what they need. Just because one lender has declined you, don’t give up.
Our mortgage experts will look at each case before deciding which lender is right for you and your individual circumstances. All the mortgage brokers we work with are whole of market and offer unbiased advice. They will have access to all the specialist lenders to really enhance your chances of achieving the mortgage you need.
The expert brokers we work with have experience in dealing with all aspects of company director mortgages, and importantly using the whole of the market to access the very best deals available.