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Mortgages for Company Directors

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Mortgage Brokers for Limited Company Directors

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As a limited company director, you may be under the impression that it is difficult to secure a mortgage, or that you need to consult a specialist provider. That is no longer the case but it is advisable to consult a mortgage broker to find the most competitive deals, as there are some crucial differences to how these types of mortgages are assessed.

Company directors tend to have more complicated incomes than other self-employed mortgage applicants, so have historically been considered high risk by lenders. However, nowadays most lenders will consider company directors for mortgages in the same way as they would a regular applicant.

Goldmanread are experienced mortgage brokers and can help to secure mortgages for company directors. We have access to a wide range of mainstream and specialist lenders and can guide you through the application process to find the very best deal.

Can I get a mortgage if I am a company director?

Yes, you can, and it is not necessary to look only at specialist providers. Most lenders will assess limited company director mortgage in the same was as they would assess a standard mortgage application.

As more of the UK workforce has chosen to become self-employed, lenders have adapted to offer company director mortgages. Previously a limited company director mortgage may only have been available via specialist advisors who sourced a mortgage from a specialist lender, who’s typical fee may have been much higher.

This is no longer the case and a reputable, professional mortgage broker will be able to arrange a competitively priced mortgage for most directors.

What is the minimum trading period required for a company director mortgage?

Lenders will want to see a track record of income, usually over a 3-year period. In assessing the mortgage they will take into account your base salary plus your share of dividends over a 3-year period.

This income figure will generally be used although there are some lenders who will work on net profit before taxation, as taken from the company accounts.

Some mortgage providers will consider income over shorter time periods, i.e. 1 or 2 years, though these will tend to be specialist providers, most of whom will only be accessible via a professional broker, such as Goldmanread.

How much can I borrow as a company director for a mortgage?

The amount that can be borrowed for a mortgage will usually be calculated based on the income that can be proved and substantiated via the company accounts, and in addition the online self assessment calculation, sometimes referred to as an SA302.

This needs to be backed up by confirmation that tax has been paid on time with proof via the tax year overview for the director.

Lenders will also take into account other factors when assessing mortgage affordability, such as background debts, credit history, number and ages of dependents etc.

What income multiples are available for a company director mortgage?

Lenders will offer different income multiples depending on the level of income declared. Typical income multiples are a multiple of 4 to 5 times income.

Generally speaking, higher income multiples and loans will also depend on having a larger deposit.

Why choose Goldmanread as your mortgage broker?

Goldmanread have an in-depth knowledge of company director mortgages and can provide you with sound mortgage advice. Our broad experience means that we have access to a wide range of lenders across the market, including lenders who offer specialist company director mortgages.

We can manage the whole application process to alleviate the stress involved in buying or remortgaging property. Our goal is to work for you to find the best mortgage deal with the most competitive interest rates, to ease the pressure of your mortgage repayments.

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How are mortgages calculated for directors?

When assessing limited company directors mortgage applications there are a variety of ways in which the maximum mortgage level will be calculated, as follows:

The maximum mortgage will be based on an average of the last 2 years’ salary and dividends (though usually, lenders want a minimum of 3 years track record in the business).

Lenders require a minimum period during which the business has traded, normally 2 years, and will work on the most recent income if this is higher.

Lenders will base the mortgage on the net profit as demonstrated via the company accounts. Its important to note that they only accept up-to-date business accounts, usually submitted within the last 18 months.

Some lenders will want to understand more about the company and may ask for predictions of future income.

As a general rule the kind of mortgage deals available to you will depend on how much deposit you have available. Generally speaking there will be wider range of lenders who will offer mortgages to those borrowers with a larger deposit.

How much deposit do I need for a company director mortgage?

Lenders generally ask for a minimum of a 10% deposit for limited company director mortgages, with some accepting as little as 5% (i.e., 95% loan to value ratio).

If you are in a position to offer a higher deposit of say 15-30%, you will have more options open to you, with access to lower interest rates and more flexible terms.

The amount of deposit lenders accept is affected by how straightforward your application is. If there is evidence of adverse or bad credit for example, that will likely (but not always) affect the level of deposit that is required to secure the deal.

Do dividends count towards a director mortgage?

Yes, as long as you have a track records of regular dividend income lenders will take this into account when assessing affordability.

The level of dividends that the lender is prepared to consider as income varies, and will depend on their particular lending criteria.

Lenders will also want to ensure that the dividend income is sustainable and, importantly, demonstrate that any dividend income taken is not in excess of the company’s net profits.

What is the application process?

Due to the complexity of the process, it is advisable to get advice from an experienced mortgage broker before embarking on your application. They can advise on the various lenders’ criteria and guide you through what you need to declare in order to secure a loan.

What do I need to provide for my application?

How do lenders assess income for a limited company directors?

Most limited company directors take a salary to reach the threshold to pay basic national insurance contributions, to ensure they contribute enough for a state pension and other welfare benefits. This salary will be taken into account by the lender, plus any dividends taken.

Many company directors choose to leave cash in their business to reduce income tax and invest in the future of the company. So regardless of the company’s profitability, only profits drawn from the business are considered ‘income’ by some lenders when assessing the risk.

This is why it pays to consult a professional broker with access to specialist lenders as well as more mainstream lenders.

Can you secure a limited company director mortgage based on dividend income?

Yes, limited company directors who receive dividend income can use this to support their mortgage borrowing. Company directors should be able to demonstrate a track record of dividend income usually over at least a 1-3 year period.

It is not just dividend income that counts towards a limited company director mortgage, however. Lenders will also take into account the company director’s base salary taken from the business (see above).

Does being a director affect my credit rating?

A limited company director will be treated in the same was as other borrowers when it comes to assessing their credit rating. Lenders will look at factors such as poor credit history and cases of bad credit as they would anyone else.

Bad credit will usually be influenced by factors such as County Court Judgements, Defaults or missed credit commitment payments, i.e. on secured or unsecured commitments.

Before seeking mortgage advice it is always sensible to request a copy of your full credit report so you can see if there are any potential issues with your credit rating.

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Mortgages for company directors FAQs

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It is not necessarily harder to secure a mortgage as a director. The main thing to be aware of is that mortgage providers will assess your income differently to that of a standard employed applicant. Any difficulty that does arise is because company directors tend to have more complicated incomes than other self-employed applicants. Some lenders do not take company net profit into account and make their risk assessment based solely on salary plus dividends only. This could put some company directors at a disadvantage, especially those in the early stages of their business journey. That is when it is advantageous to consult a broker about specialist mortgages for company directors.
As a director you can use your limited company to arrange a mortgage. The most important factor the lender will look at is the income figure from the business, which is usually made up of salary and dividends. The limited company must be able to demonstrate a sustainable track record of income over the last 2-3 years. Company director mortgages should not be any more difficult to arrange than any other type of borrowing but its important to take good mortgage advice.
Due to the complexities surrounding the application process, it is advisable to get mortgage advice from an experienced broker if you are self-employed and particularly if you are a limited company director. They will take into account your employment status, income, credit rating and net profits before deciding which lenders to approach for the most beneficial deals. Professional and experienced brokers will have access to a wide range of lenders who will be able to offer a competitive range of mortgage products.
It is not always necessary to use specialist lenders to secure a director mortgage, as most mainstream mortgage providers will assess them in the same way. However, there are cases where it is advantageous to consider niche mortgage products, especially if you are a director of a limited company. While some mainstream lenders only consider 'income' as salary plus dividends, specialist lenders will take a company's net profit into account when assessing the risk. This means that the directors of highly profitable companies can secure a much more favourable loan. This is good news for newer limited companies who wish to retain profits to grow their business.
Although the options are more restricted, it is not impossible for directors with bad credit to secure a mortgage. It will be assessed on a case by case basis, taking into consideration the severity of the issues and how current they are.
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