Every company is created differently. That means high street lenders may treat limited company directors inconsistently.
If you have been looking for mortgage deals, you could have been offered different rates from various lenders or have been completely turned away.
But according to the Right Mortgage UK, looking for a first or second limited director mortgage is a reasonable goal. Most of the time, you will need to look for the best mortgage lender to make it easier for you.
Why Is It More Difficult to Get a Mortgage for Limited Company Directors?
There are several reasons why some brokers can be reluctant to offer mortgages if you are a company director. Part of it comes down to cautiousness about the dependability of future earnings.
Generally, limited company directors are recommended to take income as dividends instead of PAYE (Pay As You Earn) payments. That means your earnings solely depend on the company’s performance, which fluctuates.
Mortgages for limited company directors can be confusing. Some lenders only accept a 5% deposit and one-year accounts, while others insist on a huge 25% and three years and deposit.
Directors for limited companies have tax-efficient business models. But the tax benefits of leaving profits in the bank account and taking larger dividends make it challenging to convince mortgage lenders you are dependable borrowers.
Changes, such as switching your dividends levels and salary shortly before applying for a mortgage, will not help. It all depends on closed business year accounts. So what you choose to do now can’t affect the imminent application for a mortgage.
Mortgage providers deem limited company directors as self-employed applicants. This means some lenders are not likely to offer or lend higher charges and rates.
It is always advisable to partner with independent experts to make sure you choose the right lenders with reasonable eligibility policies.
Every mortgage lender has different rules. Although there are mortgages designed specifically for lenders and directors specializing in customer base, the way you report and declare your income can affect the outcome.
As a limited company director, most lenders may not use your salary from your business. It is very common for most mortgage lenders to ask you to provide details starting from three years ago.
As you already know, this doesn’t reflect the whole story of how businesses work. Common scenarios for business owners struggling to get mortgage borrowing to include directors that:
- Face a differing level of annual turnover, which causes issues when averaging calculations
- Have been trading for three years or less
- Hire family members in the business that some mortgage lenders don’t recognize
- Chooses to retain trading profits in the business
There are different ways to assess income. And getting mortgages as a limited company director is basically feasible.
For you to get bespoke advice as well as make the most out of the situation, it would be a great idea to talk to a reliable mortgage broker.
Such brokers have access to more than 100 lenders and can be able to get the best mortgage deals on your behalf, depending on your situation.