Mortgages for directors are not complicated, however, you will have to be prepared and to permit access to all your company’s figures and your personal accounting information. Certain lenders can tend to see self-employed (which category Company Directors fall into) individuals as high-risk borrowers, however, there are specialist lenders out there who can help. It’s also quite common for Directors to legally minimise earnings. This is to minimise tax bills, which can often have drawbacks when applying for a mortgage unless you use a specialist to advise you.
The assessments and criteria that lenders have for self-employed applicants can vary considerably, particularly mortgages for directors, so attempting to navigate without a guide could prove to be your undoing – always talk to an experienced broker. This is because every lender has its own criteria and in addition, every business has its own story. Maybe you’ve only been trading for a year or the majority of company profits are retained in the business. Whatever your story, our team can help make sure the right lenders hear it.
Mortgages for directors are actually straightforward. Our specialist brokers try and make the process as simple and easy as possible for you, even though you will have to gather up a lot of paperwork. We have specialist mortgage advisors who have a wealth of experience in this field, and we secure mortgages for self-employed applicants on a daily basis.
How long do I need to have been trading for to apply for a Company Director mortgage?
The first question we’ll always ask you if you’re self-employed is the length of time you’ve been trading. This is because trading history is a major factor taken into consideration by lenders when assessing mortgages for directors. Lenders base their mortgage assessment around risk. The longer you’ve been trading for should, in theory, make your application stronger as the risk for the lender will be deemed less with each year of trading.
Less than 1 year
If you’ve been trading for less than 12 months, then you will need to wait until your tax return or accounts have been filed before submitting a mortgage application. Do start talking to us before this though, as we can start to prepare your options and time it all to be as smooth a process as possible.
It’s only possible to get a mortgage if you’ve been trading for less than 12 months if you are a contractor and have worked or going to work on fixed term contracts which can outline future income. This is quite common with doctors and professionals who haven’t been trading long, but who have contract promises for the future as well as a history of employment in a similar line of work.
Between 1-2 years
If you’ve been trading for one year, you’ll have one years’ worth of accounts at least, it just may not tie in with also having 1 full tax return being self-employed. This is important as some lenders will want the tax return to tie in as well. The good news is that there are lenders that won’t make you wait until the next tax year – but this just shows why it’s vital to place your application with a lender that suits your criteria and to choose the right mortgage broker who can find that lender for you.
2 years or more
If you have at least two years’ worth of accounts then most lenders will usually consider you for a mortgage. Having three years’ accounts should provide you with access to every lender, as long as the affordability, credit check and loan to value all fit your declared income.
How much deposit will I need for a Directors Mortgage?
As each person’s mortgage application is assessed individually, the deposit amount you will be required to submit will vary. If you have clean credit and have been trading for over 2 years then you may only need a 5% deposit for a residential purchase. This is subject to your requested loan amount meeting affordability checks. Although mortgages for directors can be trickier to place, you should have access to most of the same deals as everybody else.
Higher deposits should offer you an advantage when applying for a mortgage as they’ll mean a lower LTV (loan to value), which will always make your application stronger. Not only will you have more lenders to choose from, but you could qualify for some great rates. Having a 15% deposit can get you a good deal. Having a very large deposit, such as 40%, can ensure you’re getting the best available mortgage rates.
What documents will I need to prove my income for a Company Director mortgage?
Some lenders will ask for more proof than others, so we’ve listed them all below.
- SA302 (request or download online from HMRC)
- Finalised accounts (signed by qualified accountant)
- Latest 3 months bank statements (personal and business accounts)
Can I get a Director’s mortgage if I have bad credit?
Mortgages for directors with bad credit will be slightly more restricted as the number of lenders available becomes more limited as a credit score. Adverse credit comes in different shapes and sizes so there isn’t one rule for everyone. Lenders usually assess bad credit issues based on severity and how recent they are. Depending on the severity of your credit report, and the credit score you have overall, you may need to consult a specialist bad credit mortgage broker and / or offer a larger deposit to a mortgage lender.
If my company has made a loss can I still get a Directors Mortgage?
If your company has filed a loss within the last three years, then a successful mortgage approval can be harder to come by. High street lenders will most likely decline your application based on being a high-risk applicant. Filing a recent company loss will provide the lender with doubt on whether a mortgage could be repaid, especially if the business appears to be struggling. This is where you definitely need a specialist mortgage broker to help and advise you so that your credit file isn’t adversely affected by applying where you won’t be accepted.
If you declared a company loss two or three years ago but showed a profit since then, specialist lenders may consider you. Here’s where it will help to have an experienced mortgage broker working with you, as they can correctly place your application with the right lender. The broker can also then communicate with underwriters should they have any concerns.
If the loss is due to a salary being drawn from the company, lenders may overlook this as you’ve still taken an income. This will require an experienced broker to explain this to the underwriter dealing with the application and may require additional documents to prove this, not to mention a specialist lender.
So in summary, a Company Directors Mortgage, while complicated, isn’t impossible and you should take expert advice at the earliest opportunity to make sure you start off on the right track.