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The mortgages that Ltd Company Directors are eligible for are no different to everyone else but as a Ltd Company Director, being organised and preparing early can help provide you with the best possible chances of mortgage success. The application process can be more complex than that of an employed applicant and approaching the right lender is key. A self-employed mortgage specialist can help guide you through and simplify the process.
How do I know if I’m eligible for a mortgage as a Ltd Company Director?
Where mortgages are concerned, each lender had their own unique set of criteria when assessing applicants. This means that the amount you can borrow from lender to lender can vary hugely if you’ve previously been turned down for a mortgage. There may still be options out there, you just need to ensure that you approach the right lender!
How much deposit do I need?
As a Ltd Company Director you will need a minimum deposit of 5%, and will need a good credit profile to be eligible. If you have a poor credit history or a limited trading history you are likely to need a larger deposit of 10% or 15%.
The larger your deposit, the more competitive rates you’ll have access to.
What income evidence will I need to provide?
Assessing affordability for Limited Company Directors differs from typical employed mortgage applications. Most lenders will use income withdrawn from the business (salary plus dividends) for affordability, and disregard the remaining profit generated by the company.
However, some lenders may consider your share of net profits and this could enable you to borrow significantly more if you have retained profits in the business.To prove your income, you may need to provide the following:
- End of year accounts
- SA302’s or tax calculations
- Tax year overviews
- 3 months business bank accounts
- You may also need to provide an accountant’s projection
It’s important to note that simply increasing your salary will not increase your borrowing power. Lenders will go on your last year of accounts or SA302s and Tax Year Overviews.
Your accountant should be able to provide you with tax documents. Alternatively, you can download them directly from the HMRC Portal.
How can trading history affect my mortgage chances?0-1 Years
In most circumstances, you will need to have been trading for at least one year before being eligible for a mortgage. However, it is possible in limited situations.1-2 Years
There are a limited number of lenders who will lend with only one years trading history. It will help if you have previously worked within the industry before going self-employed but not essential.2-3 Years
If you have 2-3 years of trading history, with a good credit history you are likely to have access to a wide range of lenders.
Getting a mortgage with less than one year’s trading history
Securing a mortgage with less than one year’s trading history can be challenging and not always possible. However, it may be possible in some scenarios with evidence of guaranteed future income e.g. a contract for a professional doctor.
Can I remortgage my residential to raise money to invest in the business?
It is possible to remortgage to raise capital for your business. However, some lenders will not allow this. It is important to consider the risks for capital raise for your business as your may be repossessed if you do not keep up with repayments.
What steps can I take to ensure I’m mortgage ready?
- Review your credit score – You can view a copy of your credit report score on checkmyfile and check it to ensure that all the information on there is accurate, Signing up for the electoral role, ensuring you always make payments on time and removing any old associations from your credit scores (e.g. ex-partners) may all help boost your score.
- Keep your personal and business accounts separate.
- Use a certified accountant to submit your tax returns.
- Gather the documents needed for your application (e.g. Photo ID, proof of address, proof of income, 3 months bank statements, proof of deposit, and a copy of your credit file.
Ltd Company Director FAQ’s
Do my accounts have to be signed off by a chartered accountant?
Not necessarily but the majority but the majority of lenders prefer accounts completed by a chartered accountant.
Can I borrow using my latest year’s accounts?
Yes, depending on your business growth, lenders may use an average of the previous two or three year’s income. Alternatively, some lenders consider the most recent year’s income for assessing the maximum loan amount.
I’m a company director with bad credit. Can I still get a mortgage?
Yes, the possibility depends on the severity and recency of bad credit. Each lender has different criteria – we can offer bespoke advice based on your circumstances and ensure we approach the right lender for your circumstances.
Can I get a mortgage if my company has made a loss?
Securing a mortgage after recent company losses can be challenging with mainstream lenders due to increased income instability risk. However, specialised lenders consider businesses’ challenges, offering options for those with evidence off recovery from losses older than two years.
Can I get a mortgage if I have changed my company type?
Changing your company type may pose challenges in obtaining a mortgage. While most lenders treat it as a new company, some may consider accounts from a previous business, even if it is technically no longer trading.
How do I get a copy of my SA302?
HMRC holds SA302 tax calculation information. You can print SA302 calculations and tax overviews from the online portal used for submission. Alternatively, chartered accountants can provide copies.
For personalised advice on your mortgage journey, reach out to our experienced team for assistance.