With so many people now being self-employed some lenders have changed the ways in which they will assess their income. This results in many customers being given incorrect information when applying directly to banks, building societies and often some of the less skilled mortgage brokers working in the market.
What information do I need to provide to get a mortgage as a Limited Company Director?
As a director of a Limited company the majority of lenders will only use your salary derived from the business (referred to as remuneration), combined with the dividends you take. It is common for mortgage lenders to demand you provide information ranging back over the past 3 years! As you are already aware, this does not always reflect “the whole story” of how a business works. Common scenarios of business owners who struggle to obtain mortgage borrowing include directors who:
- choose to retain trading profits within the business
- have been trading for less than three years
- face differing levels of annual turnover, causing problems when “averaging calculations” reduce the amount of capital available to borrow
- employ family members within their business (often for tax planning reasons), which is not recognised by some mortgage lenders and therefore reduces the amount of lending available
As a mortgage is secured against your home/property it may be repossessed if you do not keep up the repayments.