Jamie Lennox - Mortgage Adviser - Dimora Marketing

Limited Company Director Mortgages: The Complete Guide

Limited company director mortgages

Limited Company Director Mortgages: The Complete Guide

Wondering can I get a mortgage as a Limited Company Director is an often-asked question. With a lot of confusion about what can be used as income towards your potential mortgage.  But fear not, for I’m here to guide you through this labyrinth with a touch of humour and plenty of straightforward advice.

directors mortgage

Why Preparation is Key for Limited Company Director Mortgages

The Pre-Mortgage Hustle
Imagine trying to juggle running a company, managing a household, and then throwing a mortgage application into the mix. Sounds like a recipe for a headache, doesn’t it? That’s why having a Mortgage Broker and your accountant join forces early on is like assembling your very own Avengers team for mortgage applications. They’ll get all the paperwork sorted so you can focus on what you do best—running your empire.

The Role of a Mortgage Broker
Think of a Mortgage Broker as your personal mortgage matchmaker, tirelessly working to find you the perfect lender that fits your requirements. They’ll handle all the tedious paperwork and submit your application while you keep your business thriving. Going solo in this venture could lead to rejection and a bruised credit score, so it’s wise to consult experts like us at Dimora as we have years of experience getting mortgages for company directors.

The Essentials of Limited Company Director Mortgages

Can You Hear the Mortgage Gods Singing?
Yes, even as a Limited Company Director, the mortgage world is your oyster. There are lenders who fancy Self-Employed folks, especially those of the Limited Company variety. However, these might not be your typical high-street lenders. Finding a savvy Mortgage Broker who speaks fluent Self-Employed can be your golden ticket.

Picking the Right Mortgage Broker
Not all heroes wear capes, and not all Mortgage Brokers are created equal. Ensure your chosen champion is FCA-approved, has a registered office in England, and preferably doesn’t wear a cape to meetings.

Limited company director

Documenting Your Trading History: The Paper Trail

Lenders aren’t trying to make your life harder; they just want assurance that you can handle the mortgage. Having a trading history of at least one year and providing your latest accounts can prove just that. It’s like saying, “Look how well I handle my business. I can totally handle a mortgage too!”

The Checklist for limited company director mortgages:
Before you and your accountant embark on this journey, prepare the following:
– Up to three years of limited company accounts (if applicable)
– Up to three years tax calculations and tax year overviews

– Business and personal bank statements from the last three months
– A copy of your credit report

Armed with this arsenal of information, you’re ready to discuss your mortgage options with your broker. However, this list isn’t exhaustive and would be sensible to read our full guide on preparing for your mortgage appointment.

Assessing income for limited company director mortgages

Company accounts:
There is a variety of ways lenders will assess company accounts for limited company director mortgages. The most common way is looking at what salary and Dividend have been drawn during that account period, lenders will also look at the accounts in more detail to ensure the business levels are sustainable to maintain the levels of dividend.

For firms who aren’t drawing all of their profits out of the business, this could lead to a significant reduction of the maximum amount that can be borrowed. Therefore you may need a lender who will take a more pragmatic view and will look to use Salary plus Net Profit which could result in a greater borrowing ability. However, this may limit the lender that may be available.

Tax Calculations:
Some lenders will take a simplified approach and instead will request your tax calculations which will stipulate the amount you earned within each tax year. These will confirm the amount you have taken as a salary and the dividend also drawn during this period. However, if you run a business which isn’t drawing all of the profit out of the business it could limit the maximum potential borrowing capacity.

Other Factors for limited company director mortgages:

When looking at limited company director mortgages, there are other factors at play which need to be considered. Some lenders post covid have restricted borrowing around clients who are deemed self employed. Lenders will also look to average your income over a minimum period of 2 years. Although there are some lenders who will consider limited company director mortgages for businesses that have either been trading for 1 year or looking to use the most recent set of accounts instead of an average over a 2 year period. This is where it can become a minefield and can be sensible to seek expert advice.

The Magic Number: Your Deposit

Aim for the Sweet Spots
Deposits can unlock better rates and terms. Aim for deposit bands at 10%, 25%, or 40%. But don’t fret if you’re a bit short; some lenders offer 95% LTV mortgages. However, the smaller the deposit the more expensive the mortgage rate can become and can result in lenders be more stringent with their credit score.

How Dimora Mortgages can help with limited company director mortgages

Running a company is no small feat, and when you add household responsibilities into the mix, it’s like playing life on hard mode. The staff at Dimora Mortgages gets it. They’re here to take the mortgage load off your shoulders, helping you secure the most suitable deal, managing all the paperwork, and ensuring a smooth application process. As FCA-approved brokers, they’re equipped to guide you through the mortgage maze, offering advice on protection and insurance along the way.

So, dear Limited Company Directors, while the path to securing a mortgage might seem daunting, with the right preparation and team by your side, you’ll navigate it like a pro. Keep your business thriving, let the experts handle the mortgage stuff, and soon, you’ll be holding the keys to your new home or investment property.

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