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Will I Get A Mortgage As A Limited Company Director?
Limited Company Directors and Self-Employed applicants in general are often under the impression that they will struggle to find a mortgage. The truth is, it’s perfectly possible for both to secure a mortgage with the right lender.
As the number of UK mortgage applicants that own their own business rises steadily, Mortgage Lenders are becoming more receptive to Self-Employed applicants, with some offering products exclusively to the Self-Employed market.
The most important thing to consider as a Limited Company Director is that you are adequately prepared for your mortgage application. Before you apply, ensure that you understand all of the mortgage options available to you and how you can financially prepare for them. This way, you should have no issues at all in finding a competitive mortgage deal.
How Do I Document My Trading History?
Limited Company Directors will need well documented proof of their trading history in order to satisfy the requirements of a Self-Employed mortgage application. It’s important that your business accounts are accurate and transparent. If you usually take care of your own accounting, it’s important that you have your most recent two to three years of accounts signed off by a certified accountant.
What Will Lenders Consider As Income?
Self-Employed income is still considered to be slightly less stable than PAYE income and therefore, lenders use their own criteria to determine your income level. The figure they use will usually be an average of the last two to three years income, but this does vary between lenders.
The important thing to note is that most lenders will consider the personal salary and dividends of a Limited Company Director, rather than the overall business profits.
How Do I Prove My Income?
You will usually need to provide the following as proof of income:
- Full and certified accounts for the required period (typically two to three years)
- SA302 forms for the same duration
- Business bank statements and future profit forecasts may also be requested
PAYE
If you receive a salary from your own company then payslips are not an adequate proof of income. Instead, SA302 forms will be used to prove your annual salary.
Dividends
Dividends will also be visible on your SA302, assuming they are taxable. For non-taxable dividends, the official voucher and/or bank statements may be used as proof.
Retained Profit
Retained business profits will not be considered by the majority of lenders, although some niche Mortgage Lenders may be willing to consider them alongside your personal income, in certain circumstances.
In most cases, taking more dividends from the business in preparation for your mortgage application is advisable, as this can maximize your affordability. This can also be beneficial in saving a larger deposit, which will afford you access to more competitive interest rates.
What If My Income Fluctuates?
A degree of income fluctuation is expected from Self-Employed mortgage applicants and business owners. Lenders use an average of your income over recent years to gain a more stable picture of your income, for this precise reason.
If your income pattern shows a continued decrease over the requested duration, however, lenders will exhibit more caution. In these circumstances, only the most recent and therefore, the lowest annual income, will be considered. This will result in lower loan availability.
What Deposit Will I Need?
How you earn a living will not affect your deposit requirement, so your deposit requirement will depend on the mortgage product that you choose. A standard residential mortgage usually requires around 10% deposit as a minimum, however, the more deposit that you are able to offer the more favourable your mortgage rates will be.
From April 2021, even some of the major high street lenders are offering 95% mortgage deals, which means that it is possible to get a mortgage with a 5% deposit. The interest rates are likely to be higher for these products, so it’s worth speaking to Mortgage Brokers like First Step, to weigh up the most beneficial option for you.
How Can First Step Mortgages Help?
Here at First Step Mortgages, we are experienced in helping all types of Self-Employed mortgage applicants to find the most suitable mortgage deal. We have access to a wide variety of deals that are not readily available, but may be the best option to save you money.
As a Limited Company Director, we can direct you to those specialist lenders who are most likely to be accepting of your circumstances, and help you to prepare the relevant documentation required.
Your home may be repossessed if you do not keep up repayments on a mortgage