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Limited Company Director Mortgages – A Guide
It can be complicated when looking for a mortgage as a Limited Company Director, you might be wondering things such as how you have to prove your income or if you can use certain profits towards your affordability checks. Below are some questions answered that you may have in regards to Limited Company mortgages.
Can I get a mortgage if I am a Limited Company Director?
You can get a mortgage as a Limited Company Director and it is in fact becoming more and more popular for self-employed people to take this approach when applying for a mortgage. Lenders are becoming more flexible towards Limited Company Directors and mortgages.
How do I document my trading history and prove my income?
You need to provide your trading history and your income to a lender in order to show that you can afford the repayments on your mortgage. You will need to provide at least two years’ worth of self-assessment forms – SA302 forms. You will most likely need to provide lenders with a tax overview as well as any company accounts.
You will also need to provide three months’ worth of bank statements from your personal and business accounts. All lenders vary in their criteria and it is important to look at what your lender is asking for before applying.
What about PAYE Oncome?
PAYE Income is useful as your tax is deducted automatically by your employer and sent off to HMRC. It is easier to track your earnings if you are enrolled in a PAYE system and will be favourable to a lender.
Salary and dividends can be accepted towards your affordability check by some lenders thus ending up with a larger mortgage, but you will need to look for specialist lenders and past the high street lenders.
You might have all of your capital retained within your business and be wondering if you have options. There are mortgage lenders who will look into your retained profits and consider it towards your income. It is important to find the right lender and you should seek help from a Mortgage Broker in order to do this.
A mortgage underwriter is used to check on your credit history, property, affordability and that you fit the criteria of not committing fraud. A mortgage underwriter is usually employed by a lender and will carry out the affordability checks.
What deposit will I need?
Currently, you need at least 10% of the property’s value ready as a deposit when applying for a mortgage although in some cases especially if you are a First Time Buyer you can provide deposits as low as 5%.
There are schemes such as Help to Buy out there for First Time Buyers where the government will match a 5% deposit with another 20% in the form of a low interest loan. The larger the deposit you can provide the more likely a lender is to offer you more exclusive or discounted mortgage interest rates.
How much can I borrow?
You will be assessed on how well you can handle your money through a credit check into your finances. It is easier to get a mortgage if you have a good credit rating with no adverse credit and could mean you could borrow up to five times your annual salary.
It is important to try and get your finances in order before applying for a mortgage. If you fail to keep up with monthly repayments on your mortgage your home may be repossessed and your credit file will be damaged.
How can a Mortgage Broker from You 1st Mortgages Help?
An expert from You 1st Mortgages can guide you through your mortgage application and ensure that it is prepared well before approaching a lender. You might not understand all of the tax implications involved in applying for a mortgage as a Limited Company Director but we can help you to understand.
We want to help you make the most out of your situation and find the right mortgage products for you. There are some mortgage products out there that are not authorised and regulated by the financial conduct authority that we can gain access to.
There can be exclusive rates if you are in a position where you can provide a larger percentage deposit and this can be worth doing, helping save more money in the long term. We have built relationships with lenders and can help to guide you to a lender who is likely to accept you onto a mortgage product.