All About Limited Company Director Mortgages
Can I get a mortgage as a Limited Company Director?
As a Limited Company Director, it’s perfectly possible to obtain a mortgage and for the most part, you will have access to the same mortgage products as employed people do. Self-Employed mortgage applicants have to provide more evidence of their financial stability than other applicants, but aside from that, there is very little difference.
The amount of business owners in the UK has risen substantially in recent years, so there are a range of specialist lenders who are willing to consider Self-Employed mortgage applicants. With the right mortgage advice and some careful preparation, it should be perfectly possible to obtain a suitable mortgage offer.
How do I document my trading history?
Mortgage Lenders are looking for evidence that you will be able to maintain the repayments on your mortgage indefinitely. The longer your trading history is, the easier this will be, as they will have stronger proof of your long-term income.
The majority of Mortgage Lenders will want to see at least two years of well-documented business records, such as certified accounts and bank statements, but the more you can offer, the better. It is sometimes possible to get a mortgage with as little as twelve months trading history, however, your choice of lender will be dramatically reduced.
What will count as income?
As a Limited Company Director, lenders will either use an average figure from the past two to three years of your salary and dividends payments. Less commonly, your salary and retained business profits may be considered by some lenders, although taking additional dividends in the years leading up to your mortgage application can offer you a greater choice of lenders.
How do I prove my income?
You will usually need to provide the following as proof of your income, but the requirement will vary slightly from lender to lender.
- Certified accounts
- Tax Calculations and Tax Year Overview from HMRC
- Business banking statements
Even if you are paid as an employee, payslips from your own business are not suitable evidence of income for a Limited Company Director.
This will be considered alongside your salary and either your SA302 or bank statements should evidence it adequately.
Some lenders will consider using retained profits instead of dividends. This can be a complex process and often it may be easier for your accountant to provide details to meet the lender’s criteria.
What if I have fluctuating income?
To some degree, as a business owner, income fluctuations are expected, and averaging your income over a number of years is how lenders typically minimise their risk in this respect. You should note, however, that if your personal income and/or overall business profits have shown a steady decline over the past few years, only your most recent year of earnings will be considered when you apply for a mortgage.
How much will I be able to borrow?
Your employment status should not impact this and a typical mortgage applicant can expect to borrow between three and five times their annual income. A number of circumstances will affect which multiple of your income is used, such as:
- Your total income
- Your credit score
- How long you have been trading
- Your existing financial responsibilities
What deposit will I need?
A deposit of around 10% is the standard requirement for a residential mortgage, regardless of your employment type. Self-Employed mortgage applicants may benefit from offering a higher deposit, however, especially those with a shorter trading history or poor credit history.
Offering a larger deposit can both increase your chance of being accepted for a mortgage and give you access to better interest rates.
All Mortgage Lenders have different criteria, so if you have been refused for a mortgage in the past, don’t let this dissuade you from approaching us for advice. We have been able to source mortgage deals for many Limited Company Directors who were refused elsewhere.
How can The Mortgage Store help?
At The Mortgage Store we specialise in helping Self-Employed Mortgage applicants of all types, particularly Limited Company Directors, to obtain a suitable mortgage deal. We have access to mortgage products that won’t be found with high street lenders and can ensure that you are making the most of your mortgage, regardless of your circumstances.
We understand the additional supporting evidence required by each lender and can help you to prepare your business documentation in advance of your application to encourage a smooth and easy process.