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Getting a Mortgage as a Company Director

Getting a Mortgage as a Company Director

While being a company director may add complexity to securing a mortgage, it’s important to remember that it’s not an impossible challenge. High street lenders may need consistent criteria, leading to varying interest rates or rejections; however, getting a mortgage as a company director is possible with the right lender. Why Lenders See Company Directors […]

Feb 2024 | Mortgage Essentials

While being a company director may add complexity to securing a mortgage, it’s important to remember that it’s not an impossible challenge. High street lenders may need consistent criteria, leading to varying interest rates or rejections; however, getting a mortgage as a company director is possible with the right lender.

Why Lenders See Company Directors as Risky

Lenders perceive company directors as riskier applicants due to the nature of their income. Directors must not only demonstrate their income stability but also the financial health of their company. Unlike employees who can present their salary, directors must prove that their business is robust enough to sustain their salary over the mortgage term. This underscores the importance of meticulous preparation and comprehensive documentation.

Proving Your Financial Stability

If you’re a regular employee, six months suffice for mortgage approval. Lenders typically require at least one year of trading for company directors and often prefer three years of accounts. You’ll need to provide:

  • 1-3 years of business accounts
  • SA302 year-end tax calculations
  • Recent business and personal bank statements
  • Breakdown of salary, dividends, and your share of net profits

In most cases, these documents need to be certified by an accountant.

Finding the Right Lender

  1. Recent Year Financial Assessment: Some lenders will base their assessment on your most recent tax year, which is beneficial if your company grows. This avoids averaging less profitable earlier years, which can result in a smaller loan or higher interest rates.
  2. Net Profit Assessment: Certain lenders consider your share of the company’s net profit rather than your salary. This approach can open up better mortgage terms if your company is doing well.

 

When navigating the complex world of securing a mortgage as a company director, the value of a mortgage broker cannot be overstated. Brokers like Habito can provide invaluable support, sifting through thousands of deals from numerous lenders to find one that suits your unique situation. This support can offer a sense of reassurance, alleviating some of the stress and complexity of your mortgage journey.

How Much Can You Borrow?

With the right lender, you can access 95% mortgages (5% deposit), though 90% or 85% mortgages are more common. Larger loans usually require higher deposits, which is part of the lender’s strategy to mitigate risk.

Mortgages with a Poor Credit History

Securing a mortgage with a poor credit history can take time and effort. While minor issues like a missed phone bill may not significantly impact you, more severe problems like a CCJ can limit your options. It’s important to note that declaring company losses can also raise red flags for lenders, potentially necessitating more extensive deposits or higher interest rates.

Buy-to-let mortgages Through a Limited Company

For some, getting a buy-to-let mortgage through the company might make sense. This option is generally for special purpose vehicles (SPVs) dealing in property. Remember, this route involves paying corporation tax and stamp duty and typically requires a 25% deposit.

Final Thoughts

When company directors apply for mortgages, they undergo additional scrutiny. However, with thorough preparation and support from an experienced broker, securing a favourable mortgage deal is possible. For more comprehensive advice, it is recommended to seek assistance from mortgage advisors who specialize in navigating complex income structures.

Excited to discover more? Reach out to our experienced advisers, and we’ll provide an overview of available options while delving into the best-suited solution for you. Call us on 0333 335 6595 or message us to get started!

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