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Limited Company Director Mortgages Explained
You may be running a very successful business, but without good mortgage advice it can be tricky to get a fair mortgage deal.
It’s not that Limited Company Director Mortgages are hard to find, the challenge is making sure lenders get a good sense of your income in calculating the loan amount.
Can I get a mortgage as a Limited Company Director?
One you have at least one year of profitable trading behind you, it’s fairly easy to find a mortgage. It’s still possible if your business is only a few months old, if you choose a specialist lender.
The main challenge for a Limited Company Director is getting the right size loan. Lenders calculate your loan amount by multiplying your income – but Company Directors often pay themselves a low salary. As a result, you may be offered a loan that’s much smaller than you were hoping for.
The key to getting the mortgage you want is to find a lender that understands small businesses and will take salary, dividends and retained profit into account when assessing affordability.
Assessing income for a Limited Company Director mortgage
While some lenders could underestimate your potential as a borrower, specialist lenders understand that your salary doesn’t give a true indication of your earnings.
These lenders are more likely to consider some or all of the following when assessing a mortgage application:
- Operating profit (before or after tax)
- Director’s salary
- Latest year’s figures
- Other applicants employed by the company
- A reference from a qualified accountant
Rather than have a one-size fits all approach to lending, these mortgage providers are more likely to underwrite each mortgage individually, giving you a more tailored offer.
How do I document my trading history?
All mortgage lenders will want to see your company’s trading history, as well as proof of income. There are a number of documents and details you might need for your mortgage application. The requirements can vary by lender, but usually include:
- Two years’ certified company accounts
- Tax year overviews
- Three months’ personal and business bank statements
- Self assessment forms (SA302)
What happens if I have fluctuating income?
Many lenders take a two or three year average to calculate your annual income. Big variations in how your company has performed and how much you have taken out of the business can make this more complicated.
If your profits have fallen in the last year or two you may need to justify this to your lender for them to consider you. Mortgage Advisors will suggest a suitable approach if your income is very variable.
Another factor that affects your mortgage prospects is your credit score. If you have any adverse credit history it can narrow down your choice of lenders, and you may have to pay higher interest rates.
How much deposit will I need?
Putting down a larger deposit will smooth the process considerably. You’ll gain access to more lenders and better interest rates, especially if you can contribute a 20% deposit or more. The minimum deposit is 5-10%, provided you have good credit.
It can be helpful to use a mortgage calculator to see what different property values and deposit amounts will mean for the repayments on your mortgage.
How can a Mortgage Broker help with company director mortgages?
Finding the right Limited Company Director Mortgage can be difficult without expert help. At Independent Mortgage Solutions we’ve helped many company directors find competitive mortgages and achieve their property goals.
We take time to explore your circumstances, looking at you through the eyes of a lender to make sure that we can find suitable products across both high street lenders and specialist providers. Many specialist lenders are only available to Mortgage Advisers, so we can get you a comprehensive range of options. We will even take care of your mortgage application, making sure you have all the documents you need.
Independent Mortgage Solutions is a trading style of IMS (Watford) Ltd. IMS (Watford) Ltd is an appointed representative of PRIMIS Mortgage Network. And also the senior home care at abetterwayinhomecare.com. PRIMIS Mortgage Network is a trading style of Personal Touch Financial Services Ltd which is authorised and regulated by the Financial Conduct Authority. Our registered office is in St Albans, Hertfordshire.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE