Will I get a mortgage as a Limited Company Director?

Although Limited Company Directors and other Self-Employed applicants have notoriously had a more difficult time securing a mortgage, today they have access to the vast majority of mortgage products that their more traditionally employed counterparts have. 

Whilst high street lenders have had to adapt to accept rising numbers of business owners in the UK, there are also many specialist Mortgage Lenders who will consider Self-Employed applicants, some exclusively. 

Providing you are aware of your options, the application process and how to prepare yourself financially for your application, competitive mortgages are perfectly attainable for Limited Company Directors.

How do I document my trading history?

As the director of a limited company, you will need to keep substantial, up-to-date business accounts, as most lenders will need broader evidence of your income than they would for an employed applicant. Whilst acceptance criteria will vary, you will usually be expected to provide two to three years of business records and accounts information.

Depending on the nature of your career, some specialist lenders for Self-Employed may consider as little as twelve months worth of accounts and trading history. for more competitive interest rates, however, it’s a good idea to delay your applying for a mortgage until you can offer at least two years of trading records.

What will lenders consider as income?

As a Self-Employed applicant, your income will be assessed slightly differently for the purposes of calculating your loan. Your trading style, as well as the lender’s individual acceptance criteria, will determine exactly which calculation method is used, however, for Limited Company Directors, an average figure gained from your last two to three years’s salary and dividends payments will usually be used.

How do I prove my income?

The exact documents required will vary depending on each lender and their individual requirements, however, the below list are standard requests:

• Two to three year’s worth of accounts, signed off by a qualified accountant 
• Two to three year’s Tax Calculation (SA302’s) forms
• HMRC Tax Year Overviews to cover the same duration
• In some cases, business bank statements and further business forecasts may be required. Lenders sometimes check the net profits to ensure your business can afford to maintain your salary and dividend payments

PAYE 

Tax Calculations (SA302’s) forms will be required to determine your salary information and every Mortgage Lender is likely to request these documents. A payslip will not be acceptable, even if you are treated as an employee within your own business.

Dividends

Dividends will be considered as an average figure, alongside your salary, so long as they do not exceed net business profits.

Retained Profit

Whilst it may feel at odds with standard business practice, profit retention in the run-up to a mortgage application will not be beneficial. Drawing down more dividends for a short duration in the run-up to your mortgage application can both maximise your affordability and give you the opportunity to save a larger deposit.

What if my income fluctuates?

To some degree, fluctuations in income are standard for business owners and Self-Employed applicants. Lenders already seek to balance this out by using an average of your income over a defined duration.

Overall, having fluctuating income shouldn’t be too challenging unless the fluctuations are dramatic or there is a continuous decline in your annual income. Where this is the case, only the most recent year’s figures will be used to calculate your loan, which can reduce the amount you’re able to borrow.

What deposit will I need?

It’s unusual for Self-Employed applicants to be required to pay a higher deposit than average unless they have an adverse credit history. Unless you apply through a home ownership scheme, the average mortgage applicant can expect to need a 10% deposit towards their mortgage.

If you can afford to do so, offering a larger deposit can improve your chances of being accepted for a mortgage and increase your options in respect of both lenders and more competitive rates.

How can Blue Pepper Mortgages help?

Whilst it’s not as difficult as it once was to obtain a mortgage as a Self-Employed business owner, the application process can still be more arduous and challenging. Here at Blue Pepper Mortgages, we are happy to help you with the administrative burden of your application, managing communications on your behalf and reporting back periodically with updates.

We’ve helped to connect many Limited Company Directors with specialist lenders who are accommodating of your employment type and provide the most suitable mortgage product, for your circumstances.