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Limited Company Director Mortgage - Everything You Should Know

When you are a director or a limited company, finding a mortgage can be difficult. We help business owners find a limited company director mortgage with lenders who understand the complexities involving your income.

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Limited Company Director Mortgage

If you are a director of one of the four million plus limited companies in the UK and need a mortgage, you may have heard that getting a limited company director mortgage can be challenging. 

Many directors struggle to find lenders who fully understand their earnings and this can cause issues during the application process. We know it’s frustrating so at Simple Fast Mortgage, we’ll help you find the right mortgage. Got a question? Scroll down to see if we have the answer to your question below.

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Limited Company Director Mortgage

Why is it so Hard to get a Limited Company Director Mortgage?

Some directors struggle to get a mortgage because most lenders consider self-employed borrowers higher risk. Accountants also try to be tax efficient by reducing your tax liability, which can reduce how much you can borrow.

Rules vary between lenders, and if you don’t meet their requirements they are rarely flexible. This can cause issues but it doesn’t always mean you won’t get a mortgage. We work with mortgage lenders who know about limited company income so we can get you the mortgage you need.

Not sure if you’ll be accepted? Contact us on 0333 090 2025 to discuss your situation with us.

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Are Mortgage Rates More Expensive for Directors of Limited Companies?

No, Lenders don’t usually offer specific mortgage products for directors so you can access the same interest rates as other borrowers. But you will need to evidence your income, have a sufficient deposit and meet affordability rules. 

Limted Company Director Mortgage

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Who is Eligible for a Limited Company Director Mortgage?

Limited Company Directors are commonly split into two categories by lenders based on the number of shares held in the company – those who hold less than 20% of shares and those who own more than 20% of shares. Some limited company directors do not own any shares and are effectively an employee. The number of shares you hold in a company normally dictates how the lender will assess your income and therefore what income evidence the lender will want to see. 

Are you a Sole Trader? Check out our page for more information on Self-Employed Mortgages 

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What Income do Lenders use for Limited Company Directors?

Limited company income can be confusing with different income sources available for directors to take. The main benefit limited company directors have is the ability to use their net profit (usually after corporation tax) to calculate their mortgage affordability. As a result this means that limited company directors do not unnecessarily have to take profit from the company, which might cause tax consequences, in order to use it towards mortgage affordability. 

Mortgage lenders will often use a combination of limited company net profit as well as any directors salary. They may consider this over one, or two years to calculate an average. 

Some mortgage lenders will use personal tax to calculate mortgage lending affordability. This would be documents such as an SA302 tax calculation, an SA100 tax return, and a tax year overview. These documents will show PAYE salary and dividends taken.

It all varies based on the lender so it’s important to get expert advice to see what is best for your situation. Click Get Started to apply.

How do Limited Company Directors Prove Their Income?

To confirm your income, lenders will request one or more of: two years profit & loss annual accounts, a reference from the accountant (usually completed on the lender’s own form), SA302s or tax assessments and bank statements (business and / or personal). We’ll confirm the exact requirements when you apply. Get Started

How Long Does a Limited Company Need to be Trading for to get a Mortgage?

Lenders commonly prefer a minimum term of two years trading in order to consider you for a limited company director mortgage. If however, you have only been trading for one year, there may be other options available, especially if you have a long track record in the same field either as an employee, or have recently incorporated from being a self-employed sole trader. Contact us today to find out more.

Can I Apply With One Years Company Accounts?

Are you a relatively new business? If you only have one years worth of figures, it can be difficult to get a mortgage. Fortunately, some lenders do accept one years figures but they may ask to see other documents. For instance, it is likely they will want to review the last few months of business bank statements. Additionally, an accountant’s reference is likely to be required. We will assist you to obtain and provide all the paperwork and often work directly with your accountant. To find out more call us on 0333 090 2025.

I’ve Recently Incorporated my Limited Company, can I get a Mortgage?

If you’ve recently gone from sole trader to limited company, you might still be able to get a mortgage. It will depend on when you incorporated, and how much experience you have in your field. If you have incorporated recently you will ideally have at least one year of limited company accounts as an incorporated business. However, there could be a solution if we can prove your income is consistent and sustainable. For more information and to discuss your current situation please contact us.

If you have not yet incorporated, take a look at our page on Self-Employed Mortgages for help getting a mortgage.

 

My Limited Company Net Profit has Been Inconsistent, can I get a Mortgage?

Due to the nature of how accountants work, earnings may appear to be inconsistent. Alternatively, you may have incurred some one-off costs which have affected your trading figures causing your income to have temporarily reduced. It is important that we fully understand your business so we can present it to the mortgage lender in the best light possible.

Mortgage underwriters regularly query the cause of inconsistent figures. And depending on the explanation and the lender’s rules, they may either take an average or your latest year’s figures for affordability. 

I’ve Previously Made a Loss, will I be Accepted for a Mortgage?

An unfortunate part of being a director of a limited company is that sometimes, businesses can make losses. If your business has made a loss in the last two to three years this can make it difficult to get a mortgage. Whether you will be accepted or not will depend on when the loss was, how much it was for, the reason for it, whether your business has returned to profitability and what the chances are of a similar loss happening in the future. If your business has made a loss please contact us on 0333 090 2025 to discuss your circumstances.

Can I use Limited Company Retained Profit to get a Limited Company Director Mortgage?

It may be possible to use retained profits towards the affordability for your mortgage application. This could save you tax, as profits do not have to be extracted from the business. Unfortunately, the number of lenders who allow retained profits towards affordability is limited, so it is important to work with a mortgage expert. There are lenders that will accept retained profits, but their lending rules could be tighter. They may not use all of your retained profits for affordability and it is likely that they will request additional income evidence. For example, an accountant’s certificate for the current year and business bank statements. Please Contact Us to find out more.

Can I take a Directors Loan From my Business for the Deposit?

If your business is performing well and you have a good balance of retained profits, you could consider withdrawing funds as a deposit for your purchase. The majority of lenders will allow this but commonly will request more information. The underwriters may ask what impact taking a directors loan will have on your business and how the loan will be repaid. If you are considering this route, make sure you take professional advice from an accountant as there could be tax or other consequences.

I Have a Poor Credit Rating, can I get a Mortgage?

A poor credit rating will affect whether you can get a mortgage and how much you can borrow. Consequently, much will depend on the detail of what has caused the bad credit rating. We work with applicants who have missed payments, incurred defaults and CCJs (County Court judgements), and can usually find a solution for their circumstances. To find out the chances of getting a mortgage call us on 0333 090 2025. We may ask for a copy of your credit file (which you can obtain from credit agencies such as Check My File) so that we can get a full picture of your circumstances and advise you appropriately.

How Much Mortgage can Limited Company Directors Borrow?

Contact us today for a full assessment of your current situation and we will confirm how much you can afford, what you will be able to borrow and what level of deposit you will need. When you apply we will also be able to confirm what documents you will need to provide to prove your limited company director income – usually two years final accounts, bank statements and proof of identity. Want to apply? Get Started!

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