As a director of a limited company, most mortgage lenders will see you as self-employed. It may be more challenging to secure a mortgage, but it’s doable. You’ll need to research, prepare the relevant paperwork and find a dependable mortgage broker with expertise of securing mortgages for the self-employed and company directors.
The importance of personal income and financial stability
You’ll need to show mortgage lenders that your personal income is enough to cover the mortgage repayments each month, along with other financial commitments you may have.
You’ll also need to show a healthy and stable credit history. Any evidence of missed payments, defaults or CCJs are likely to make securing a mortgage more difficult.
Assessing the director’s shareholding and business profitability
If you’re a director of a limited company, it’s likely you’ll have a shareholding in that business. If so, the mortgage provider will want to see the business accounts.
If you’re a director but don’t have a shareholding, the lender will see you as an employee. Some mortgage providers will underwrite you as an employee if you own anything below 25% of the limited company.
How mortgage lenders review business accounts and financial statements
Mortgage lenders will be interested in what income you obtain from the business and in what way you receive it.
They tend to offer mortgages for limited company directors who have a trading and accounting history of two or more years. If you have between one and two years trading history, you’ll be able to show one set of accounts. Some lenders will find this acceptable, though not nearly as many. And, if you have one year or less behind you, you may find it difficult to secure a mortgage. Though, if you can prove you’ve fixed an ongoing contract, that would help.
They’ll also want to see your SA302 tax statements, and personal and business bank statements.
Consideration of dividends, salary, and other forms of income
Usually, lenders use a combination of your salary and dividends – payments you take from a share of the profits – to assess your mortgage eligibility as a self-employed person, and don’t refer to company profit. However, some specialist mortgage providers will take your business’ profits into consideration.
Most high street lenders don’t take retained profits into consideration.
How mortgage lenders view personal guarantees or liabilities
A personal guarantee is reassuring for a mortgage lender. It shows you have confidence in your business. This agreement should not be taken lightly, as if things don’t work out as you’ve planned, you’ll be personally liable for repaying the loan if the business is unable to. Personal guarantees are unbreakable, so proceed with caution. A mortgage specialist can help.
