How Limited Company Directors Can get a Mortgage
Navigating the mortgage landscape as a Limited Company Director can be more complex than for typical employed applicants. This guide will equip you with the essential knowledge and steps to secure a mortgage, ensuring you maximise your chances of success.
Can a Company Director Get a Mortgage?
Yes, a company director can get a mortgage. However, the process can be more challenging than PAYE employees due to the unique financial structure of a company director’s income. Some lenders shy away from complex applications, but luckily there are still lots of lenders who exist who cater for complex scenarios including company directors.
Eligibility Criteria
Each lender has unique criteria for mortgage applications. Key factors include:
- Deposit: Generally, the deposit requirements are similar to those for employed applicants. However, more complex applications (e.g., poor credit history, limited trading history) might require a larger deposit (15-30%).
- Income Assessment: Most lenders will consider only the salary and dividends you withdraw from the business. Some lenders may also consider your share of the company’s net profit, which can significantly increase the loan amount you qualify for.
- Trading History: A minimum of one year’s trading history is typically required, with more options available if you have two or more years of accounts.
Income Assessment
Lenders will assess your income based on the salary and dividends you’ve withdrawn. For example, if your company made a £250,000 profit and you paid yourself £50,000, most lenders will consider the £50,000 as your income. Some lenders, however, will consider your share of the net profit plus your remuneration from the company (salary), potentially allowing you to borrow more.
Find out Your Options
Proving Your Income
To prove your income, you’ll need:
- At least three months of company bank statements.
- SA302 year-end tax calculations and tax year overview statements from HMRC.
- Company accounts for at least one full tax year (some lenders may require more).
Impact of Trading History
0-1 Years Trading
Most lenders won’t provide a mortgage, but a few will consider this.
1-2 Years Trading
A minimum of 12 months of trading can open up the range of lenders, though some may require two years of trading.
2-3 Years Trading
Most lenders will consider applications from company directors with 2-3 years of trading history.
Using a Remortgage to Raise Capital
You can use a remortgage to raise capital for your business with some lenders, but some lenders also have restrictions (e.g., financing startups, repaying gambling debts). The amount you can borrow will depend on the property’s value, your income, and the amount of equity. you can utilise our mortgage calculators for an idea.
Mortgage Case Studies for Limited Company Directors
We have helped limited company directors with a range of mortgage needs, including purchases and remortgages where income, retained profits or recent business performance needed careful consideration.
The case studies below show real examples of customers we have helped and demonstrate how factors such as salary, dividends, company accounts, business performance and lender criteria can affect the mortgage options available.
Common Questions Asked by Limited Company Directors
Do my accounts have to be signed off by a chartered accountant?
No, some lenders accept SA302 year-end tax calculations, though most prefer accounts signed by a suitable qualified accountant.
Can I borrow using my latest year’s accounts?
Yes, some lenders will consider your most recent year’s income, which can be beneficial if your business is growing.
Can I get a mortgage with bad credit?
Yes, but the options depend on the severity and recency of the bad credit.
Can I get a mortgage if my company has made a loss?
It’s challenging with mainstream lenders, but specialist lenders may still consider your application if you can show recovery.
Conclusion
Securing a mortgage as a Limited Company Director requires understanding your unique financial situation and finding the right lender. By being prepared and seeking specialist advice, you can navigate the process successfully. Contact a specialist mortgage advisor to explore your options and take the next step towards securing your mortgage.
