Limited Company Director Mortgages - keeping it simple
If you’re applying for a mortgage as a Limited Company Director, it’s important to be prepared in advance. Mortgage applications, when you’re Self-Employed, can take up valuable work time, especially when you’re busy running a company and a household.
Having an experienced Mortgage Broker and your accountant on hand to help early on, means you’re at an advantage even before you start your property search. Working with you as a team, they’ll produce all the paperwork you need to support your application.
What’s more, a Mortgage Broker will liaise with lenders on your behalf to find the right mortgage fit, complete your application and submit it on your behalf. All this while you stay focused on your business.
Beware of going it alone and risking rejection, which can damage your credit score. So talk to your accountant and a reputable Mortgage Broker, like The Mortgage Mum, today.
In the meantime – use our simple guide to Limited Company Director Mortgages.
Can I get a mortgage if I am a Limited Company Director?
Yes, and there are mortgage lenders that specialise in offering mortgages to Self-Employed people, in particular Limited Company Directors. These aren’t always your regular high street lenders.
These lenders usually pre-qualify mortgage applicants via Mortgages Brokers who liaise between you and the lender. So find an adviser that is well-versed in helping Self-Employed clients.
When choosing a Mortgage Broker to help you, it’s important to be cautious who you choose. Always check their credentials.
Those who are credible will be authorised and regulated by the Financial Conduct Authority (FCA) and have a registered office in England.
How do I document my trading history?
Lenders don’t actually want to make applying for a mortgage harder for Self-Employed people. They just need to be sure their applicants will be able to afford the mortgage repayments now and in the future.
This means they need evidence that shows how you run your business. First of all, they will expect you to have been trading for a minimum of one year.
You’ll need to produce your latest years’ accounts for the most recent tax year, showing your income, expenditure, net profit and the amount you pay yourself in salary and dividends. This information will be used to determine the mortgage amount you can borrow.
So get your accountant on side early on so they can start preparing the paperwork you’ll need to submit.
Here’s a simple tick-list of information for you and your accountant to prepare prior to discussing your residential or Buy to Let mortgage options with a broker.
- Limited company accounts – up to the last three years (if applicable)
- Payslips showing your PAYE income for the past 12 months
- Proof of dividends you’ve paid yourself
- Business and personal bank statements – for the past three months
- A copy of your credit report
Listen to our Self Employed Mortgages podcast - The Essential Guide to Mortgages when you’re Self Employed
How will my income be assessed?
A lender will want to see all the income you receive via your business and other sources, such as Buy to Let properties or other PAYE income. If you’re applying for a joint mortgage, your partner’s income will be included too.
As a Limited Company Director you usually pay yourself a small salary. This is typically up to the £12,570 annual pre-tax allowance.
You also draw down dividends from your profits. In essence, the more you earn, the more money you will be able to borrow. This income will be assessed by looking at your end of year accounts including your tax year overview and tax year calculation from HMRC.
Retained profit is profit in your business that you haven’t paid out yet. Some lenders will take this into account as money you haven’t drawn yet and an indication that your business is sound. Some lenders will also substitute salary + dividends to salary + net profit, so bear this in mind and please let your Mortgage Adviser know if this is a more favourable figure for you.
What if my income has peaks and troughs?
If your business is seasonal with periods of high and low volume trade, tell your Mortgage Adviser. They will explain this to the lenders they approach on your behalf. It is our job to build a picture for the lender that they feel comfortable with… tell us your story, and we’ll do all the hard work for you!
How much deposit will I need?
Aim for one of the recognised deposit bands as this will deliver better interest rates, fees and payment flexibility. The bands are 10%, 25% and 40%.
There are now lenders on the market offering mortgages with a 5% deposit, along with lenders offering 95% LTV mortgages under the Government’s Mortgage Guarantee Scheme. If you have a good credit record, and buying a residential property worth less than £600,000, you may qualify. https://themortgagemum.co.uk/5-deposit-mortgage-guarantee-scheme/
How can The Mortgage Mum Help?
At The Mortgage Mum, we know how hard it can be to run a successful, busy company. You work long hours to satisfy your customers and manage your business. Time is not your own, especially when you have a household to run on top of that.
We’re in the business of helping time-stretched company directors like you, find the right mortgage offering the best value for money, so you can secure the property you want.
We don’t just stop there. We take things a level higher by helping you compile all the documents you’ll need to substantiate your application, then we’ll
- approach specialist lenders that lend to Limited Company Directors
- help you secure a mortgage that’s right for you
- complete the application and submit it on your behalf
- liaise directly with the lender, ensuring your application processes smoothly
- keep you informed every step of the way
- advise you on protection and insurance
As regulated and authorised specialist Mortgage Brokers with an office registered in England, our appointed representatives are qualified to discuss your finances with you and recommend the most appropriate lenders and mortgage products.
Speak to an expert
We will work at times that suit you and your family, carrying out appointments via video call, telephone or email, giving you the benefit of first class service, around your own schedule, and in the comfort of your own home. So let us handle your mortgage today and find out how well we can look after you, The Mortgage Mum way!