Limited Company Director Mortgages
How to Get Limited Company Director Mortgages
Can I get a mortgage as a Limited Company Director?
Limited Company Directors generally have access to the same range of mortgage products as anyone else. The only real difference is that, as a part of the application process, Self-Employed mortgage applicants will have to provide more substantial proof of their income than more traditionally employed applicants.
There are an increasing number of specialist Mortgage Lenders who are happy to help Limited Company Directors and other Self-Employed applicants, with some choosing to exclusively offer mortgage deals to that demographic. With a continuing rise in SME business owners in the UK, even high street lenders are having to adapt to accept this type of applicant. The key to finding a competitive deal is to ensure you are fully prepared in advance of your application, with our help, this should be no problem.
How do I document my trading history?
When you apply for a mortgage, the lender is going to want evidence that you have a reliable source of income. For Self-Employed applicants, it can take a little more to convince them of the stability of your finances, given that Self-Employed income is still viewed as less stable than employed income. If you can wait until you have two to three years of continuous trading history before you apply, you will have an easier time proving this.
Ensure that you have two to three years of certified accounts and bank statements available and the longer history you can show of a stable income, the better your chance of securing a competitive deal will be. Whilst some specialist lenders will be willing to look at Limited Company Directors with just one year’s trading history, however, the interest rates will be significantly higher in these circumstances.
What will count as income?
When you are Self-Employed, the type of business you carry out will determine what is considered income. In the case of a Limited Company Director, an average income calculated from the most recent two to three years of your personal salary and dividends is often used. A few lenders may also be willing to look at your retained business profits. However, there are also some lenders who will utilise the latest years figures rather than an average, if there has been growth that can be sustained.
How do I prove my income?
Certified accounts and SA302 tax forms for the required period will be required and some lenders will additionally ask for a tax year overview from HMRC and your business bank statements for the same duration.
If your Limited Company pays you a salary as director, your payslips will not be adequate proof of income, only your accounts and SA302 form are accepted.
SA302 or bank statements are ordinarily used to prove dividend income.
If you choose to apply via a lender who will consider your net profits alongside your own income, it can be a complex process. It’s advisable to have an accountant to assist with this method of application.
What if I have fluctuating income?
Whether you’re a Sole Trader or a business owner, Self-Employed earnings often vary from year to year, so some degree of fluctuation is expected. If your profits decline concurrently, however, lenders will only consider your most recent year of earnings.
How much will I be able to borrow?
Your borrowing is assessed on your affordability (income minus outgoings) regardless of how it is earnt. You will therefore be able to borrow within the same range as a typical employed mortgage applicant, which is usually between three and five times your annual income.
What deposit will I need?
A typical minimum deposit requirement for a Standard Residential Mortgage is around 10%. If you have a shorter trading history or poor credit, you may benefit by offering more than the minimum requirement.
The Mortgage Guarantee Scheme, which was launched in April 2021 means that it is now possible for creditworthy applicants to obtain a 95% mortgage, which lowers the deposit requirement to 5%. Bear in mind, however, that this will increase interest rates.
How can Yellow Brick Mortgages help?
At Yellow Brick Mortgages we have helped many Limited Company Directors to find the ideal lender and mortgage product for them. Our Mortgage Brokers have access to the whole market for first charge mortgages including many specialist lenders, allowing them to find a suitable mortgage deal for almost any circumstances.
To help ensure that you are ready to apply, we will guide you through the preparation of your required business documentation, giving you the best opportunity of securing a competitive mortgage deal without the hassle of failed applications.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.