Limited Company Director Mortgage
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Can I get a mortgage if I am a Limited Company Director?
You can get a mortgage if you are the Director of a Limited Company, in fact, it is becoming more and more popular to become Self-Employed so much so some lenders have changed the ways they assess income!
There are a range of mortgage products out there and many of them catering towards the Self-Employed. You must make sure you have the documentation prepared that you will need as well as your self-assessment forms and SA302s to prove you have paid your taxes in the tax years.
How do I document my trading history?
You need to make sure you are keeping records of any income you are receiving, as well as any contracts you have signed to be able to work too. If you fail to keep business records and file your taxes appropriately you could get yourself into trouble.
You should try to keep details of the following:
- Directors, shareholders, and company secretaries – their details and how long they have been involved with the company
- The results of any shareholdings
- Promises the company makes if something goes wrong (indemnities)
- Transaction of any shares in the company
- Loans or mortgages against the company’s assets
- Debentures – company loans and who they are to be repaid to.
You need to make sure you also have records of your stocks and any accounting that has taken place, this includes:
- All money the company has received and spent
- Details of any assets
- Debts the company owes or is owed
- Stock takings to work out a stock figure
- All goods bought and sold
- Where you bought goods from – receipts of purchases/hire
You need to make sure that you provide everything you can to do with your Limited Company to prove that you have a regular steady income that can support the repayments on your mortgage. If you cannot afford mortgage repayments your home may be repossessed or assets may be taken as collateral.
Retained Profit, PAYE Salary and Dividends
As a director of a Limited Company, you will come across the terms, PAYE, dividends, and retained profit when applying for a mortgage. The way in which you pay yourself and your employees can affect your mortgage application due to the taxes involved.
As a business owner, you will know that you can keep profits within the business for whatever reason you want. The problem with this is some lenders will not consider this as a figure to put towards your income.
If you pay yourself a salary through the PAYE payroll then you would have registered your company through HMRC. PAYE is the easiest way to pay your taxes and keep a good record of your income.
When your company has made enough profit you can pay yourself dividends to top up your director’s salary. Dividends are not issued and taxed in the same way as PAYE and require a self-assessment form for your tax returns.
No matter your trading style, it could be worth getting in touch with a chartered accountant to ensure you are deducting tax expenses where possible and are being accurate in your declarations.
An underwriter is a financial expert who verifies your income, assets, debt, and property details to gain approval for your loan. They mainly assess how much risk you are to a lender if they are to give you a loan.
An underwriter can pull your credit score and credit report and explore your financial history, this can be useful when it comes to closing accounts you do not use anymore or boosting your credit score.
Underwriters will verify your income and employment which is so important if you are operating Self-Employed. Approaching a lender with an underwriter already working on your finances and verifying them will look more attractive on you as a loan borrower.
How do I prove my income?
As someone who is Self-Employed, you will need to be prepared to provide at least three years of accounts. You need to find a specialist lender who is going to take all of the income you need to get the amount you desire into account.
Mortgage lenders tend to consider the following things when assessing income:
- Operating profit before or after taxes
- Director’s Salary
- Latest year’s figures
- That you have been operating for at least a year
- Other employees
- Reference from a chartered accountant.
You will need to put in your self-assessment and SA302 forms if you are not under the PAYE payroll and have these to hand to show your lender too. The criteria that lenders will ask for you to fulfill will vary depending on which lender you choose.
You can opt to provide a bigger deposit than 10% too, to boost your chances of being accepted by your chosen lender, larger deposits can make you more attractive and less high risk to the lender.
How can a Mortgage Broker help?
When it comes to being Self-Employed you should get in touch with a Mortgage Broker before you have declared your income and expenses as they can help you to get the most out of your company in terms of your mortgage.
Mortgage Brokers can help with the mortgage application and know what is required from you to be accepted by lenders. It can be hard to find a lender who fits all of your needs. We are Whole of Market Mortgage Advisers and have access to products not available on the high street and exclusive deals through our Network Quilter Financial Planning Ltd.
They will ensure you have all the documentation before approaching a lender and do not tend to charge fees until you have received a mortgage offer or until your mortgage has completed.
There are some mortgage products out there that are not authorised and regulated by the Financial Conduct Authority that can be very useful to Self-Employed applicants too – a Mortgage Broker can help you find these.
Buy to Let mortgages are not regulated by the Financial Conduct Authority.
Your home may be repossessed if you do not keep up repayments on your mortgage.