Mortgages for Company Directors
Unlike employees, the income for Company Directors is a bit less straightforward, which can make it more challenging to obtain a mortgage. Mortgages for company directors are a lot more difficult to get than they were years’ ago, before the economic downturn and it can be even more complex for those who do not fit in with the ‘norm.’
Those who work under self-employed status have variable income, depending on the status of the business, which is why mortgage lenders are a bit warier to offer mortgages. When you work for an employer, you earn the same amount, year on year (unless you are lucky enough to get a pay rise!), so lenders know you are risk-free, and you can depend on your income. This is very different to Company Directors or those under any self-employed status.
If you are under this category, you might not know where to start looking for a mortgage for directors or what you should be looking for. Finances are complex for Company Directors, but there are lenders out there who will be willing to lend to people in this position.
At Finance Surgery, we work with Company Directors who are looking for a mortgage and have helped hundreds of customers find the right solution to suit their needs. We know that everyone’s circumstances are different, you may have steady accounts, or your income could be extremely variable.
You may even have suffered business losses or have adverse credit and we can help with any of these situations. We know what mortgage lenders want and we will work with you to support you with obtaining the mortgage you desire.
If you wish to obtain a mortgage, you will need to be able to have been trading for a year or more. If you have been under a limited company for less than a year, it will be more difficult, but not impossible to get a mortgage. Some lenders will be more lenient, depending on the circumstances. The important part is that you can prove your income and your ability to pay back the mortgage.
Some lenders will want to see more than one year of accounts, while others will be happy with this. It all depends on the lender. Most mortgage lenders will look at the salary and dividends you have drawn from your company account, in order to establish your income and affordability.
Specialist lenders may take into your share of the profits in the company to establish your income. The latter is often more favourable. It is important to work with a lender who is experienced in dealing with mortgages for company directors. At Finance Surgery, we have extensive knowledge in this area and our trained advisors will discuss the options with you, so you find the right option for your needs.
In order to prove your income to the lender, you will need to provide your full accounts and, in some cases, your SA302 year-end tax from HRMC. As a Company Director, your income is likely to be different year on year and therefore most mortgage lenders will ask for two- or three-year’s accounts, which will also need to be verified by an accountant.
Some lenders also ask to see bank statements from your personal account, so it is worth making sure these are in good shape before applying for a mortgage. For instance, you may want to make ensure you don’t have any missed payments on your account or anything the lender may feel worried about.
The lender just wants to be 100% sure you can make the payments to the mortgage, so anything you can do to put their mind at ease, will greatly help the process.
The way your income is calculated depends on your status. For example, if you are a Company Director, under a limited company, your income will be calculated as salary drawn, plus any dividends. If you are in a partnership or sole trader, it will be share of net profit.
There are specific mortgages for directors of limited companies. Some difficulties can arise if you have changed the way you trade. For example, many business owners start as sole traders but go on to register as a limited company, as their income grows.
Mortgage lenders often view this, frustratingly, as a new business and may require at least one year of trading accounts under that trading style. This is not the case for all lenders though, some will take this into consideration when assessing your mortgage application.
At Finance Surgery, we know the most suitable lenders for those changing your status and we won’t let you waste time filling out forms for lender who are unlikely to accept you. We will help you complete your application in the most favourable way to help you achieve a positive outcome.
Tax liability is lower with mortgages and dividends, than it would be with salary or taxed net profit. A Company Director could end up with a higher amount than someone on a fixed salary, as some lenders will be willing to increase their usual mortgage amount. If you can show your affordability is higher, you may be able to get a higher maximum amount on your mortgage, depending on the lender.
It is not uncommon for a business to suffer from losses and/or have an adverse credit history. If you are a Company Director in this situation, you may believe it is impossible to obtain a mortgage, but this isn’t necessarily true. Each lender has different terms, and some will still lend to you, even if you have had business losses in the past or adverse credit. You may get a specific loan for bad credit.
Most lenders will still offer you a mortgage if you can show you have a good level of income, but perhaps with some missed payments. If you have CCJ’s, it may be a little more difficult, but this depends on the value and the length of time since the CCJ was recorded. If it is 2-3 years ago, you’ll have a much better chance than if it was only a year ago or more recent than this.
If you have defaults or debt management, it is still possible to get a mortgage. However, if you are in an IVA or have filed for bankruptcy, you may need a deposit to be able to secure a mortgage. If you have repossessions, it is unlikely you will be able to get a mortgage, unless it is historical, or you can put down a deposit. The terms are different depending on the mortgage lender and the value of the deposit they will accept, which is why it is always worth looking around at different options.
We understand and can relate to the frustrations you have when trying to obtain a mortgage for company directors. We know it can be difficult, especially if you have other complications, such as adverse credit.
We work with a range of mortgage lenders to provide you with as many options as possible, in the hope that we can provide you with a mortgage to suit your circumstances. Our team are trained and experienced to help deliver the right results for you, based on your needs.
You will be assigned with a trained advisor who will discuss the options with you and help you complete an application, ready to be submitted to the most relevant lenders. If you want the right advice and support throughout the application process, we are here to deliver results for you, no matter what your circumstances may be.