Getting a mortgage as a company director

You can be assured that a range of lenders out there will offer mortgages to limited company directors. A few of the big high-street names are moving in the right direction regarding this type of lending, but typically it’s the smaller, more niche corners of the market that offer the most flexibility. It’s important to bear in mind that company director mortgage application criteria can vary between different lenders.

Generally, lenders will expect your company to have been trading for at least a year before you apply. Some lenders may make exceptions to this for certain professionals, such as doctors. But, in these cases it is usually because a contract can be used as evidence of future income.

Lenders will usually want to see your company accounts covering at least one full tax year, although often you’ll be asked for more – two- or three-years’ worth.

Sometimes lenders are willing to look at a 12-month “snapshot” of your accounts rather than making you wait until the next tax year-end. This can apply when your company’s accounting year does not run April to April. Therefore, your first tax return does not cover a full trading year.

How do I prove my income as a company director?

Most lenders will ask you to provide the following when applying for a mortgage as a company director:

• Full finalised accounts from the past 2–3 years certified by a qualified accountant.
• SA302 year-end tax calculations from HMRC, that covers at least one full tax year.
• Copies of your business and/or personal bank account statements, usually from the past three months’, although they may require more.

If a lender asks for more than 1 year’s accounts to verify income, in most cases, they will take an average to calculate your income figure. This can be frustrating if your business has built over the period concerned. In this case, it’s also likely that they will require a business forecast of future earnings to support the application.

It’s worth knowing that particular specialist lenders can base their income figures on the most recent year’s results. These lenders can be more flexible with their lending and have a much wider view of your situation, which can allow you to borrow more.

Will I have to put down a bigger deposit as a company director?

When applying for a mortgage as a company director, you will not have to put down a larger deposit. In theory, you should have access to the same mortgage deals as any other borrower. This is typically up to 95% lending in straightforward scenarios.

Normally, larger deposits are required if you have a bad credit history. They can also be used to gain access to more financially attractive mortgage products, like ones with lower interest rates.

Some specialist lenders, with more flexible assessment criteria, may require a larger deposit to be put down – limiting the maximum LTV to, 85% for example. This will allow them to offset the increased exposure to risk in comparison to standard mortgage lending.

Be aware that it’s also common for most lenders to require larger deposits on larger loan amounts. On mortgages over £750,000, for instance, a lender may restrict the LTV to mitigate the increased risk.

Who are the best mortgage lenders for company directors?

We can’t give a list of the best lenders to use, as each application is different. What works for someone else may not work for you. Furthermore, lending and assessment criteria varies from lender to lender. This means that certain lenders may be more suited to people with smaller deposits or bad credit.

Lenders with experience in these mortgages understand that your base salary provides an incomplete picture of your company’s profitability. As mentioned, different lenders still vary in how they will calculate your “income”.

Most lenders, particularly mainstream ones, will only consider your income to be that which you’ve drawn from your company. Therefore, when assessing your application, they will consider the salary, plus dividends, drawn.

However, there are some specialist lenders who will consider your share of the company’s net profits as your income. This can make a significant difference in affordability calculation and the maximum loan amount.

How to maximise your chances of being accepted for a mortgage as a company director

We understand that applying for a mortgage as a company director with a slightly complex income can be a little daunting at times.

So, we have put together some tips you can following to ensure you put yourself in the best position when applying.