Mortgages For Company Directors
Mortgages for company directors can be very complicated. Are you self employed or employed in the mortgage lenders eyes?
Some lenders accept one year of accounts and a 5% deposit, others insist on 3 years and a huge 25% deposit.
Depending on who & how we proposition the application, some lenders will use dividend payments, some will not.
So, how do you find out which ones will give you the best deal?
Getting A Mortgage As a Limited Company Director
As a limited company director, you are in a great position to get a mortgage as you have control over your company accounts.
Several lenders recognise that even if you don’t take out all your profit as dividends, it is still your money and you could potentially take it out later.
They factor in this extra option when they stress test your affordability which works in your favour. This means that if you want to keep your salary and dividends low for tax purposes, we could still use the profit and your salary to secure the mortgage you need.
Some specialist lenders instead consider your share of the company’s net profits as your income, making a considerable difference in affordability calculation and the maximum loan amount.
In case you had higher net profits last year compared to the previous ones, there is good news.
Some lenders average only the last 2 years or use the latest year’s net profit figures.
With so many options at your disposal, we can find the appropriate lenders who offer mortgages for company directors based on your unique limited company accounts history and your circumstances.
How many years trading do I need For A Limited Company Director Mortgage?
Most lenders prefer you to have two years worth of accounts and most prefer to take an average of the last two years. Similar to self employed mortgages.
Less than 1 year
Anything under 12 months then the reality is that you’ll struggle to secure a mortgage. The only thing that may enable you to obtain a mortgage with less than 12 months trading history is to have written contracts that guarantee future income. Doctors, IT Contractors and Professionals who haven’t been trading long quite often have such contracts to support a mortgage application.
1-2 years
If you’ve been trading for 1 year, you will have at least a year’s worth of accounts net profit to show. The tax year starts and ends in April, so your first year of trading will probably be split between 2 different tax years. They will want to see your accounts for the second tax year so that they can assess a full year’s accounts.
There are, however, lenders that will not make you wait until the end of your second tax year. This highlights the importance of finding the right lender & using an expert mortgage broker for your circumstances when applying.
2+ years
If you have at least 2 years’ trading and accounting history, the majority of lenders will be willing to consider you for a mortgage.
3+ years
Three years accounts should mean every lender will consider you, as long as your credit score, affordability and LTV are all in order as well.
Your company accounts could be showing a marked improvement for the current year than previous performance for a number of reasons, growth after the initial start-up of the business, market expansion or acquisitions or mergers etc.
Placing you in a stronger financial position.
Pretty much all lenders will be prepared to offer a loan based on this amount rather than an average of the previous few years if this revenue can be shown to be sustainable and not simply a one-off.
How much deposit do I need for a limited company director mortgage?
The deposit requirements for a director is no different than it would be for an employed client. A minimum of 5% of the property value would be needed.
Shared ownership and help to buy purchase options are also available to limited company directors.
The main thing to remember is that a deposit has the potential to reduce the LTV, so the lower you can make it, the greater chance your application will succeed.
A lower LTV will give you much more choice in terms of both rates and offers from lenders. For instance, a deposit of 10% can get you a reasonable deal, while a 50% deposit will likely open you up to the best possible mortgage rates from many high street lenders.
A poor credit history and need a bad credit mortgage, then you are likely to require a deposit of at least 10%.
If you have any questions or concerns about your particular situation, feel free to contact us and one of our mortgage brokers will be able to assist you further.
Can a Company Director get a mortgage if their company made a loss?
I believe it would be very unlikely. A drop in profit may spiral into a loss for a business, perhaps through no fault of the business plan or the Company Director’s doing but instead due to a big change in the market or the unpredictable force of Covid.
A loss on business accounts may raise red flags for high street banks and lenders will likely categorise a Company Director with a loss as a high-risk applicant and therefore decline any application submitted.
The other potential issue would be, if the business has made a loss, what income would the lender use to calculate how much they would lend to you?
Limited Company Director With Bad Credit
Lenders will take into account seriousness of debt problems, such as default, late payments, defaults and debt management plans.
In some cases, lenders will have higher interest rates or ask you to put down a bigger deposit.
Past credit problems may make it more difficult to get a mortgage. The mortgage lenders vary considerably when it comes to adverse credit.
Most high street lenders would be a no go, we would speak to a specialist lender when applying for your mortgage deal. As mentioned above, they might request for a larger deposit to give you a better loan to value. They might also have higher interest rates and larger product fees.
If you have a history of having a credit card problem, it could be difficult to apply for the same kind of a mortgage to get it.
There are some lenders who will be flexible in lending to people with past credit problems.
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Mortgage Rates For Limited Company Directors
Company director mortgages are not treated any differently to other rates or mortgage schemes.
Mortgage rates for company directors will be treated no differently to any other rates. Lenders will be willing to accept a mortgage based on verified income.
We’ll be able to offer the same rates and products as any other applicant. Interest rate you get charged will be largely determined by the level of deposit you can provide.
The market is constantly shifting, and new deals are available almost every day and bespoke deals are becoming more common.
Frequently Asked Questions – Limited Company Directors
What documents will I need as proof of income? – Mortgages For Company Directors
As a self employed individual, you will be asked for a number of documents to prove your income. The amount of proof required is higher from some lenders than others. So here are all the documents you are likely to be based for:
- Finalised accounts (in spreadsheet form or from an accountant)
- SA302 (download online or request from HMRC)
- Last 3 months’ bank statements
Please note that some lenders will ask for all of the above when getting a mortgage, while others won’t.
The document that will be required by virtually every lender when applying for a mortgage for limited company directors is the SA302 form.
What Is A Special Purpose Vehicle Mortgages For limited company?
Special Purpose Vehicle company is a company set up to deal with buying, letting or selling buy to let properties. Lenders accept SPV companies even if there’s no trading history.
Not every lender accepts a buy to let purchase or remortgage via a limited company.
The interest rates and associated fees are normally higher compared to buying in your name. With some of these buy to let mortgages the lenders fees can be in excess of £2000.
We are confident that you get the best mortgage deal possible whether you buy under your name or or using an SPV.
Can you work around my hectic work schedule?
Our Mortgage Brokers frequently work with busy people whose time is very precious. We can come to you and fit around your schedule to your mortgage application submitted.
For Limited Company Directors Mortgage Advice, Ask An Expert For Their Advice
Whether you’re just curious for now or you’re eager to get the ball rolling. We have company director specialist brokers who can help.
Contact Us Today On 03300 432428 or send in an enquiry today to discuss further.
