Limited Company Director Mortgages
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A Guide to Limited Company Director Mortgages
Applying for a mortgage when you work for yourself takes more preparation than it does for employed mortgage applicants. That’s because you need to prove the income you earn from your business will be secure enough to sustain the repayments on your mortgage now and in the future.
Can I get a mortgage as a Limited Company Director?
Most definitely – there are specialist mortgage lenders who deal specifically with people who run their own limited companies. However, their preferred method of receiving mortgage applications is by introduction from an authorised Mortgage Broker.
So, before making appointments with estate agents or looking at high street lenders to approach, stop. Going it alone means risking rejection which can damage your credit score if there have been too many searches on your credit record.
What’s the best way to apply for a mortgage?
Specialist lenders prefer to receive mortgage applications that have been pre-qualified by a Mortgage Broker. So discussing your plans with an experienced Mortgage Broker first, is the best approach to applying for a mortgage as a Limited Company Director.
Choosing one that’s familiar with helping Self-Employed clients will give you an excellent head start. They’ll advise you on the information lenders want to see, so you can ask your accountant to get all the documents you need ready in plenty of time.
They’ll also calculate how much you can borrow based on your director’s salary, dividends, plus net profit retained in your business. You can include other Self-Employed income too, such as any rent you earn as a landlord if you own Buy to Let properties.
They’ll also help you choose your deposit options.
Once you’ve established these elements, they’ll approach a selection of lenders on your behalf to arrange a Mortgage in Principle. You’ll then have the green light to start your property search, knowing your budget beforehand.
What documents do I need to prove my trading history?
Lenders need to see proof of how you run your business and expect you will have been trading for at least a year before applying for a mortgage. The simplest way is to connect your Accountant and your Mortgage Broker.
Your Mortgage Broker will ask your accountant to provide:
- your limited company accounts for the past three years;
- evidence of retained profit if requested
- your payslips showing your PAYE income
- dividend drawdown confirmation slips
- your business bank statements for the past three months
- your account’s statement verifying your business is well run
How will my personal income and affordability be assessed?
A lender’s underwriter will assess how much you can afford to borrow based on your income, outgoings and other borrowings.
They will expect to see evidence of all your income earned via your limited company and elsewhere. This could be rental income or other PAYE income if you’re employed part time. Your spouse or partner’s income will be added if you’re applying for a joint mortgage.
You can prove your personal income using your:
- PAYE payslips
- P60 and SA302 forms showing income and tax paid
- Copies of your personal bank statements
- Copy of your credit report
Pay off any outstanding debt prior to submitting your application, especially if there is adverse credit on your record.
My trading style fluctuates – how will this be viewed?
If your trading style means there are peaks and troughs in your turnover and profits, a lender will average these over the year. Ensure you explain this to your Mortgage Broker at the outset.
How much deposit will I need to have?
Generally speaking, the larger deposit wins the better mortgage rates. If you’ve been trading for less than three years, it’s likely a lender will ask for a larger deposit to offset their risk.
It’s a good idea to aim for a deposit band of 10%, 25% or 40%. These bands trigger better interest rates, fees and flexibility for paying your off mortgage sooner.
If these deposit bands are beyond your reach, ask your Mortgage Broker to explore lenders offering 95% LTV mortgages under the Government’s Mortgage Guarantee Scheme.
How can Heritage Mortgages Help Me?
At Heritage Mortgages our experienced advisers are used to helping Limited Company Directors apply successfully for residential, Buy to Let mortgages and remortgages.
Finding the most suitable mortgage deal on your own can be time consuming, especially while running a business. So we handle everything for you, giving you all the advice and guidance you need throughout the entire application process and beyond.
We’ll help you secure the mortgage that’s right for you by:
- Finding out what you want to achieve
- Search the UK lender market for the most competitive mortgages
- Liaise with lenders on your behalf to narrow down the search
- Compile your document, complete and submit your application
- Liaise with the lender to ensure your application runs smoothly
- Keep you updated at every state
As regulated and authorised specialist Mortgage Brokers with our office registered in England, our appointed representatives are qualified to discuss your finances and recommend the most appropriate lenders and mortgage products.