Mortgages For Limited Company Directors
Everything you need to know about getting mortgages for limited company directors.
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Getting mortgages for limited company directors can be a challenge. As a company director your income is sometimes complicated. You will most often be paid dividends as well as your salary, and usually more dividends than salary.
Whilst it’s complicated, it’s best to make sure a directors application is packaged correctly. This means you can get a mortgage as easily as an employed person to some extent. At Albion Forest mortgages we specialise in mortgages for limited company directors and can help you get your mortgage.
What is a directors mortgage?
Strictly speaking there is no directors mortgage. If you are a company director you need to have your application packaged correctly in order for a lender to assess it. This is where we come in, getting your mortgage application set up so that it can be assessed quickly and correctly.
Getting mortgages for limited company directors
As the director of your company you will generally own more than 25% of your company. This will mean you will need to apply as a self employed person.
The first thing you need to do is find out how much you can borrow, we discuss this a bit more below. Once you’ve done that you can look at using your net profits rather than your dividends. Therefore potentially borrow more.
Can I get a self employed director mortgage?
If you are considering mortgages for limited company directors you will need to own 25% or more of your company and have been trading at least one year.
Does being a director affect my mortgage application?
Yes, it does. There is no getting around the fact that you will apply for mortgages for limited company directors in a different way to employed people. You will need different documents, potentially more documents than an employed person.
That said, it is still very much possible. With the right mortgage broker packaging your application you can still get a mortgage for limited company directors.
Do dividends count towards a mortgages for limited company directors?
Yes they can. Usually a lender will use an average of your last 2 years salary & dividends. That said, if you have been trading one year, there are still options.
You may also have made large net profits, but not paid yourself dividends. There are lenders that will consider salary and net profits rather than dividends, as you could have paid yourself those dividends if you wished.
How long have you been trading for?
If you have been trading over 3 years and your income has been stable, you can most likely look at most lenders. You will have a long history of income for the lenders to establish a pattern. If your income has been decreasing they will probably take the latest year. As I’ve said before though, some lenders will take your latest year, rather than an average.
The most common way to assess self employed income is an average of the last 2 years, or the most recent year if your income is decreasing. If you have 2 years of accounts and your income has been stable or increasing, picking a lender will mostly be down to how much you would like to borrow.
If you have only been trading a year you can still get a mortgage, you’re just a bit more limited, we have a whole article on this here.
How much deposit will I need for mortgages for limited company directors?
Usually 5% would be the minimum. However due to Covid-19 most lenders would now want 10-15% deposit.
With deposit the general rule is the more the better. You will open yourself up to more lenders and more products. Also generally the rates are better if you have more deposit.
How much can a director borrow?
This varies from lender to lender. However you can usually borrow between 4-4.5 times your income. As we’ve mentioned a few times some lenders will take your salary and dividends as your income, and some will take your salary and net profits. The main thing is picking the right lender and packaging your application correctly.
Can I get Buy to let mortgages for limited company directors?
Absolutely! In fact we have a whole article on this here.
What documents will I need to prove my income?
This depends on the lender. Most will want to see your latest 2 years tax year overviews and tax calculations, we have a guide on how to get these here – Guide to download your self employed documents. Some lenders want your Accountant to fill in a certificate stating your income. Some will take your accounts with a reference from the accountant.
The general rule is speak to a specialist mortgage broker, they will be able to find the right lender and then work with you to get the correct documents for that lender.
Mortgages for limited company directors with bad credit
Lenders can be quite understanding with bad credit. We have a whole article on bad credit here. You shouldn’t let bad credit put you off trying to get a mortgage, there is a whole range of lenders and products tailored to bad credit, some on the high street.
The best thing for you to do if you are a Director with bad credit is to get in touch with a specialist broker like ourselves who can talk you through your application.
Change of company type
Quite often Sole traders may change to being limited company directors. Lenders understand that, and we’ve said it a lot but it comes down to how the application is packaged. Becoming a Director is a natural progression of a business expanding, so as long as the application is set up the right way, to the right lender they should understand this.
Borrowing using most recent years’ figures
Whilst not common practice by lenders by a long shot, this can be done. Some lenders will use your latest years Salary & Dividends or Salary & Net Profit. Some will even take your salary & dividends or net profit if you have only been trading one year.