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Limited Company Director Mortgages – get the loan you want
Running your own business means you are used to feeling in control. So it can be challenging when mortgage lenders don’t offer you the loans and rates you feel are fair.
Limited Company Director Mortgages aren’t difficult to find, but it often takes expert advice to locate the most valuable offers.
Can I get a Mortgage if I am a Limited Company Director?
The challenge is not so much finding a mortgage lender that will accept you, it’s more about the huge variation in what you might be offered.
This is partly because each lender will calculate your income in a different way, and will have different criteria for what they will and won’t accept. Some further challenges you might come across include:
- The need for a minimum 15% deposit
- Refusal if you’ve been trading for under three years
- Restrictions if your company has seen losses or credit issues
- Setbacks if you’ve recently changed trading style
- Only being assessed on 50% of net profits if you’re in a partnership
What deposit will I need?
In general, you should have access to the same mortgage offers as anyone else, unless you have particularly adverse credit. You could therefore get a mortgage with a deposit as low as 5%.
The challenge with a small deposit is that with such a high loan-to-value ratio, mortgage interest rates will be high, and your monthly repayments more expensive. Putting down 15% or more will get you more competitive rates.
How do I prove my income?
Your income is the main factor in how lenders decide much you can borrow. But Company Directors often take a low salary for tax reasons, and pay themselves additional dividends from the company. This can mean that your mortgage offer is much lower than you might hope for.
Certain specialist lenders will base their loan on your company’s retained profit instead of salary and dividends, which can mean you’re able to borrow much more.
In terms of proving your income, it will depend on the lender, but you can expect to supply company accounts, tax returns and bank statements.
How do I document my trading history?
Many lenders require at least two to three years’ trading history for a company director mortgage. What this means in practice is that you need to supply documentation that proves your business has been operating for the stated time period.
This usually means sharing certified accounts for each year. If your business has not been performing well in recent months, but you have new contracts or other opportunities in the pipeline, it can help to share these with the lender too.
If your business has made a loss in the past three years, it may be more difficult for you to find a mortgage, particularly with the high street lenders. It’s a good idea to seek advice in this situation to help you find a suitable deal.
What if I have fluctuating income?
Many company directors have a variable income, perhaps because they take irregular dividends from the company, or because they have an unpredictable flow of work.
Lenders want to be reassured that you can comfortably afford the monthly repayments on the loan, and this irregular income can make them feel that you are a riskier customer.
The lender will often take an average annual income across 2-3 years of trading as the basis for their offer. Some company directors decide to take more money out of the business as they prepare to apply for a mortgage, to help increase this income calculation.
How can a Mortgage Broker Help?
Mortgage Brokers are here to take the stress out of finding a limited company director mortgage. Our mortgage advisors will take time to explore your specific situation, your business performance and your property goals. This way we can find you lenders and mortgage products that both meet your needs and offer good value for money.
We’ll talk you through the available deals so that you can make an informed decision, and make sure you have all the documentation you need to start your mortgage application. We can also explore relevant mortgage protection products that might be helpful for your situation.
Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured on it.