Having limited company director status can bring additional problems when applying for a mortgage. But it’s not hard to find a deal that benefits you. If you have previously been shopping for a mortgage agreement, you may have received offers with drastically varied interest rates from several lenders or may have even been denied.
But obtaining a mortgage, a second mortgage, or even a buy-to-let property as a corporate director is unquestionably viable. Most of the time, you must find the best lender like the Right Mortgage UK. But you should be aware of the following.
What causes lenders to be wary about lending to limited company directors?
It all comes down to risk. Mortgage lenders want to know that the money they have invested in their clients will be repaid because they have invested a lot of money over a lengthy period. They believe that being at the top of a company’s pyramid is riskier than being a few levels down.
You will need to demonstrate that you have a steady income and can consistently make monthly payments when applying for a mortgage, as is always the case. However, suppose you’re a director of a limited business. In that case, you also need to demonstrate that the firm’s income is reliable enough to continue paying yourself a regular wage, not just for the foreseeable future but also for the duration of your mortgage.
What do I need to prove as a limited company director?
The minimum tenure required to serve as a company director is typically one year of operation. Even so, you’ll undoubtedly need to prove that you have current projects representing potential future revenue. Additionally, it’s not uncommon for lenders to want to review three years’ worth of accounts before making you an offer.
Lenders are also aware that your wage isn’t necessarily a reliable indicator of how successful and secure the business is. You’ll need to provide them with further information about your business and personal finances in addition to the typical documentation to support your mortgage application:
- Your accounts for one to three years
- Your SA302 year-end tax computations
- Your most recent three to six months’ worth of business financial statements
- Your account statements for the preceding three to six months.
A breakdown of your income, dividends, and percentage of the company’s net profits after taxes. Most of the time, you’ll also require an accountant’s certification of the statements.
What is the loan limit for corporate directors?
There are a few 95% mortgages for company directors available if you can find a suitable lender, but you’ll still need to put down 5% of the purchase price. 85% or 90% mortgages (with a 10% or 15% down payment) are undoubtedly more typical. Bigger down payment will help you receive the best terms on your interest rate.
You should anticipate putting down a higher proportion as a deposit as the bigger the loan you seek. Once more, everything depends on the lender carrying out their obligations.
The final word
You may have more deals available if your business is doing well and the lender bases their calculations on the revenues.