Mortgages for Company Directors
As a company director, it can sometimes be difficult trying to find the right mortgage deal. You might have discovered that the criteria of mainstream lenders is not particularly suited towards self-employed applicants. It can be even less relevant to limited company directors, whose finances are often more complex.
If you run your business as a limited company, it can be a challenge knowing where to begin when looking for a competitively priced mortgage. Here, we’ll run through some key pointers.
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What we cover in this guide
- Getting a mortgage as a company director
- Read our self-employed mortgage guide
- Try our self-employed mortgage calculator
- Company directors’ mortgages using the latest year’s accounts
- Finding the best mortgage lenders as a company director
- How much can company directors borrow for a mortgage?
- Mortgages for company directors with bad credit
- I have declared company losses, can I still get a mortgage?
- Company director mortgage advice
- Frequently asked questions
Getting a mortgage as a company director
As a director, it’s possible to find lenders who are willing to offer you a mortgage on reasonable terms. However, it is not always straightforward. Typically, these will be smaller, specialist lenders who can offer more flexibility when it comes to assessing your income.
However, like all lenders, they will each have their own criteria for calculating affordability. They will also assess your profits and assets differently when deciding how much you can borrow.
When applying for a mortgage as a company director, most lenders will expect your company to have been trading for a year beforehand. They will require you to provide at least one year’s worth of accounts, certified by a chartered accountant. However, they may often request up to three years accounts.
If your tax year does not match the usual HMRC April to April template, then a lender may consider the last 12 month trading period, rather than making you wait until the end of the current tax year.
Fill out our quick and easy Self-employed calculator below. We only require a few details to see how much you may be able to borrow.
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Company directors’ mortgages using latest year’s accounts
Are your company accounts showing a marked improvement for the current year compared to previous performance? This could obviously be for a number of reasons, such as growth after the initial start-up, market expansion, acquisitions or mergers, or a run of successful tenders.
This will place you in a stronger financial position for borrowing. Many lenders will be prepared to offer a loan based on this amount rather than an average of the previous few years if this revenue can be shown to be sustainable and not simply a one-off.
Finding the best mortgage lenders as a company director
The criteria for a mortgage and the policies on income requirements can vary greatly from lender to lender. However, mortgages for limited company directors are not necessarily hard to find or secure. Applicants who have been declined by mainstream banks and building societies can usually find help from specialist lenders. Understanding your situation and knowing which lenders to approach based off this is key.
Get in touch today and we will pair you with one of our expert advisers who can help you get the right deal.
How much can company directors borrow for a mortgage ?
The amount you can borrow will be largely determined by your verified income. Lenders usually consider a mortgage value of between 3.5x to 5x your annual earnings. This will vary from lender to lender and can be influenced by other factors. A common factor could be a poor credit history. If a lender perceives you as higher risk, they will try to mitigate their exposure to a default.
Different methods of working out your income can have an impact on how much you could borrow. Let’s say you take a base salary plus dividends of £50,000. Assuming the lender is working on a multiple of 5x your income, you’re looking at a maximum borrowing amount of £250,000.
If, however, a specialist lender bases their calculation on your share of the net company profits, and that is perhaps £200,000 PA, then you could be looking at a maximum of £1million (5x £200k).
If your company has only been trading for a short period of time, or you don’t know what may be classified as income for the purposes of a mortgage calculation, feel free to complete the enquiry form or call one of our team for further information and assistance.
Mortgages for company directors with bad credit
Bad marks on your credit history can cause problems for all kinds of mortgage applicants, not just company directors. However, it is possible to get a company director mortgage even if you have bad credit.
Like with any bad credit mortgage, lenders will consider two main points:
- The severity of the adverse credit event.
- The length of time that has elapsed since it occurred.
The more severe and recent the event, then the more effect it will have on your application.
Luckily, there are many lenders who will extend mortgages to people who have had credit issues, such as , you may be obliged to accept a slightly higher interest rate or need to provide a bigger deposit. Some of these specialist lenders can only be accessed through a broker or intermediary. Therefore, if you want to discuss your options, get in touch today.
I have declared company losses, can I still get a mortgage?
Seeking to secure a mortgage after your limited company has declared a loss in the last three years can arise obstacles. This is because you will be perceived as a higher lending risk, especially by mainstream lenders.
Again, just like with bad credit, there are many specialist lenders available who may be prepared to get you a mortgage. It’s about knowing where to look and who to approach based on your circumstances. An expert broker like us can help you do so, ensuring you get the best mortgage as a company director.
Company director mortgage advice
Our team don’t only offer mortgage advice for company directors, but we also provide guidance through the application process. This is quite a niche sector within the market, and lenders’ policies can vary from one to another.
Our experience helps us find the lender who can offer the best deal for your situation, ensuring you have access to the best company director mortgage rates.
If you’d like help with a mortgage today, please call us on 0330 094 5876 or get in touch here.
Frequently asked questions...
- Will I have to put down a bigger deposit as a company director?
- What income do lenders use for company directors?
- How do I get a copy of my SA302?
The fact that you’re a company director does not in itself mean that you will need to provide a larger deposit. You should be able to access the same deals and loan-to-value (LTV) ratio offers as any other applicant.
Usually, this means you can borrow up to 95% of the property’s value in normal circumstances. Although, if you are seen as a risk to lenders, due to bad credit for example, you may be expected to have more.
It’s common for directors to minimise their income tax by drawing only a small salary from the company, retaining profits within the business, and taking dividends. Unfortunately, this low income on paper may mean that a lender will think you aren’t able to afford the mortgage you need.
Most lenders, including specialist lenders, will only consider the money you have drawn from the company as your income. So, they will assess your base salary, plus dividends drawn, when looking at an affordability calculation.
There are some lenders with a broader view and understanding of your business. These lenders have the flexibility to consider your share of the company’s net profits as your income, putting you in a far stronger position when borrowing.
An SA302 is the form you receive from HMRC after filing your year-end accounts. It will detail your income from all sources and your tax liability, breaking down how your income tax and National Insurance contributions have been calculated.
If you have an accountant, the SA302 will have been printed off directly as part of their process. However, if you submitted your tax return yourself, you’ll be able to sign into your account and access the records to print your SA302.
You should note that while many lenders accept printed SA302s, some may still ask for original documents from HMRC. If they do or you are unable to print them out for any reason or you submit your annual tax return by post rather than online, then you will need to contact HMRC to request copies.
You can do this by calling the self-assessment helpline on 0300 200 3310 and quoting your unique taxpayer reference (UTR) and National Insurance (N.I.) number.
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