Limited Company Director Mortgage
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Limited Company Director Mortgages – what are the options?As a Director of your own Limited Company you’ll have a good understanding of financial matters. Finding a mortgage as a Director isn’t too difficult, but comparing all the options to select a suitable deal can be time consuming. Easy Street has the expertise and the contacts to help give you access to a competitive deal.
Can I get a mortgage as a Limited Company Director?If your business has been running for at least a year and is turning a profit, you should find a mortgage without too much trouble. If your business is only a few months old, it could be more difficult. When you’re a Limited Company Director, the main mortgage challenge is ensuring you can borrow a realistic amount to buy a home. Lenders use your income to calculate your loan offer, but many Company Directors pay themselves a low salary, supplementing their earnings with dividends. You may need to explore the market to find a lender that will take a fair view of your financial situation. Most will take your salary and dividends into account and some will take your company’s net profit. This could mean you could borrow considerably more.
How much deposit will I need?The minimum deposit for a home is 5%, but you will need an excellent credit rating to get a good deal. The more you can contribute as a deposit, the wider your choice of lenders, the better the interest rates and the lower your monthly repayments. If you can contribute 20% of the property value or more you will generally be an attractive customer to mortgage providers.
What documents will I need?Mortgage lenders need to see a variety of documents to confirm your identity, your income and your company’s trading history. While this can differ by lender, you will often need:
- Proof of ID – a valid passport and driving licence
- Your last two years’ certified company accounts
- Tax year overviews
- Three months’ personal and business bank statements
- Self assessment forms (SA302)
- Proof of deposit
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What are the main considerations with a Limited Company Director Mortgage?A few situations might make getting a mortgage more complicated.
- Bad credit – Lenders run a credit check on anyone applying for a mortgage. Adverse credit could mean you’re charged higher interest rates – and if you have severe debt problems like Bankruptcy or unpaid CCJs on your file you will need to seek out specialist lenders.
- Partnership structure – If your business is a partnership, a lender may calculate the loan amount based on your share of the net profit. Consequently, you may not be able to borrow as much as you might expect.
- Trading style changes – If you’ve changed your business structure in the past year, e.g. moving from sole trader to limited company, this could cause issues. Even if you have been a sole trader for years, lenders still see the limited company as a new business.
- Business losses – If you have made a loss in the past 12 months, approval might be difficult. Proving you have robust plans in place to deliver retained profits in the months ahead might help get you the loan.