Can a Limited Company Director get a mortgage?
Yes absolutely. We help Limited Company Directors every week by securing mortgages and answering questions about how to find a lender, how to get a Limited Company Director mortgage based on retained profits and whether bad credit can stop a Company Director from getting approved by UK banks or lenders.
So many people avoid applying for a mortgage as a Limited Company Director because they believe that they won’t get approved and we love helping people realise that yes, they can get a mortgage to buy a home or buy-to-let property.
What is the eligibility criteria for Limited Company Director Mortgages?
There are a multitude of self-employed mortgage lenders in the UK, each with varying criteria that banks require Limited Company Directors to meet before they approve an application.
Some lenders offer products designed specifically for Limited Company Directors and while it’s true that many will only lend to Limited Company Directors who have been trading for 3 years, there can be exceptions.
We have specialist advisors who can scour the market and locate the deals that are open to Limited Company Directors with a variety of circumstances including those who have been trading for less than 3 years.
Are there lenders who will approve a mortgage for a Company Director with bad credit?
We also have access to lenders with eligibility criteria that allows for bad credit too, but keep in mind that a person’s ability to make a successful application will depend on their other circumstances, including age, income and deposit size.
Even people who have been knocked back in the past for a self-employed mortgage can be helped, so if you’re keen to find out, we can check your eligibility without affecting your credit score.
How much deposit does a Limited Company Director need for a mortgage?
95% loan-to-value mortgages for Limited Company Directors are hard to come by as lenders usually ask for a minimum of a 10% deposit.
Higher deposits of 15 - 30% can help Limited Company Directors, and mortgage applicants in general, access mortgage products with lower interest rates or terms that are more flexible.
Having a larger deposit reduces the size of the loan in relation to the market value of the property and some lenders prefer this.
An applicant wanting to buy a home valued at £200,000 with a 30% (£60,000) deposit would only need to borrow £140,000. The borrower would own more equity upfront too if they had a larger deposit, which can help to reduce the risk of falling into negative equity.
A chunky deposit simply isn’t possible for some Limited Company Directors and there are lenders who accept lower deposit requirements.
Knowing how much you need as a deposit can help set a target to work towards and kickstart the process, so call, use the online chat or make an appointment to visit the new office.
How does a lender calculate affordability for a Limited Company Director mortgage?
Self-employed mortgages for Limited Company Directors can also be more complex as lenders will be keen to see proof of good affordability.
The way a Limited Company Director’s income is assessed for a mortgage application differs from that of an applicant who is employed full time and typically receives a salary.
Frustratingly, lending criteria differs heavily across the board too, so affordability for a mortgage could be assessed in different ways by different lenders.
How does the way a Company Director is paid affect the choice of lender?
Most LCD mortgage lenders accept income from PAYE and dividends when calculating how much someone can afford to borrow but there are a handful of niche lenders who will consider the applicant’s share of the company’s net profits, as well as their annual salary.
This can help some borrowers boost their maximum loan size and ultimately, buy a more expensive property.
That’s because UK lenders use income multiples to calculate how much they can loan and often they’ll multiply an annual salary by 4.5.
A Limited Company Director earning a PAYE salary of £35,000 a year could therefore borrow £157,500.
However, if a broker finds a lender that will take net profit into consideration too, the borrowing potential could be greater. If the annual net profit of the applicant was £40,000 a year and this was combined with their £35,000 annual salary, they could have the potential to borrow £337,500.
However you receive your income as a Limited Company Director, we urge you to ask one of our brokers for advice before applying for a mortgage.
They know where to look and who to approach, so call or use the online chat to learn what your next steps might look like.
Limited Company Director income
Will lenders accept this form of income?
Most lenders accept a Limited Company Director’s income based on the salary they take from the business
PAYE and net profit
A small group of lenders might consider an applicant with income for multiple sources including PAYE and net profit
How does a Company Director prove their income for a mortgage application?
Income is usually evidenced with finalised accounts and/or SA302 year-end tax calculations from HMRC.
A Limited Company Director will usually need to have their tax returns filed by a chartered accountant and can also expect to be asked for 3 months of their personal bank account statements.
That being said, there are a small group of lenders that accept SA302s directly from applicants who submit their tax returns themselves.
Using the HMRC Self Assessment online portal, Limited Company Directors can sign into their account and print off up to 4 years worth of SA302s.
An SA302 self-assessment tax return displays the National Insurance contributions made by the Limited Company Director but more importantly, it evidences their declared income.
Can a Limited Company Director borrow based on their most recent years figures?
Most banks and lenders will average the last 2-3 years income but for some Limited Company Directors, it could prove better to find a lender that will consider the most recent years figures if these are much higher.
The increased income could allow some to borrow more if their affordability is based on the most successful year of trade. That’s because some lenders use multiple incomes, between 3.5 to 6 x an annual income, to calculate affordability.
It’s by no means a rule but usually the higher the income, the more borrowing power.
Specialist lenders can be found with the help of a mortgage broker, so if you’re intrigued, ask us to present you with your options and highlight the lenders who accept the most recent year’s figures in their affordability assessment.
Can a Company Director get a mortgage if their company made a loss?
A drop in profit may spiral into a loss for a business, perhaps through no fault of the business plan or the Company Director’s doing but instead due to a change in the market or the unpredictable force of Covid.
While self-employed lenders are sympathetic to the many business owners who have lost money throughout the pandemic, a loss on business accounts may raise red flags for high street banks and lenders will likely categorise a Company Director with a loss as a high-risk applicant.
Find a mortgage lender that will loan to a Limited Company Director with company losses
Lending, under those circumstances, will be inconceivable for most but with specialist advice from a mortgage broker and time, it may be possible to prepare a Company Director mortgage application that is much more likely to get approved.
Specialist brokers help Company Directors improve their borrowing power with niche advice because every limited company is different.
A handful of lenders understand this and have criteria that accommodates the ups and downs that many trading businesses face.
Use our online chat for an informal Q&A with one of our Company Director mortgage experts. It’s free to use, plus it’s a quick way to get accurate information from a real person (not a robot!)
Can a Company Director get a mortgage if their company hasn’t traded that long?
Trading history can be one of the most influential factors when it comes to getting a mortgage as a Company Director. Usually, though not always, the longer a business has been trading, the better.
Steady years of reliable income and subsequently, profit, can indicate that the applicant has a sufficient source of income to cover their outgoings, specifically, their mortgage.
How does that affect mortgage availability?
0 - 1 years
Most lenders won’t provide a mortgage but a handful may under limited circumstances, for example, if there is proof of future income in the form of a contract, or if the business has changed from a sole trader to a Limited Company for tax purposes.
1 - 2 years
A minimum of 12 months of trading can open up the range of lenders available, though some lenders will ask for a complete 2 years of trading before they’ll consider the application.
2- 3 years
Limited Company Directors with 2 - 3 years trading history can expect that most lenders will be open to lending to them, subject to credit checks and other eligibility criteria.
Remember, if your business has been trading for less than 3 years, we have access to over 90 lenders, some, who accept less than 3 years of trading. Ask us to highlight the exclusive self-employed mortgages that could be viable for you.
Can a Limited Company Director use a remortgage to raise capital for their business?
Lots of lenders will be dubious about approving remortgage applications that seek to raise capital for business purposes as the risk will be considered too high.
Specialist lenders, that don’t always advertise on comparison websites, do consider remortgages under these circumstances if the Limited Company Director can meet their other eligibility criteria.
That’s why it’s important to have a mortgage application prepared professionally without any mistakes, sent to an appropriate lender with terms that can be met by the borrower.
Applying to a remortgage lender who is unlikely to approve the application could be a huge waste of money and time, something a busy Limited Company Director will likely want to avoid.
What’s the best way for a Company Director to get a mortgage?
Getting the best deal for a Limited Company Director mortgage can mean checking and comparing the eligibility criteria for lots of different lenders which is tedious, to say the least, especially if you’re not sure about which lenders can offer you the most advantageous deal.
With so many influencing factors, many find it more efficient to speak directly to a mortgage broker who can provide tailored advice that is relevant to the individual(s) that are seeking advice.
Ask a company director mortgage expert for their advice
Whether you’re just curious for now or you’re eager to get the ball rolling, we have company director specialist advisors who can help.
Call 023 8098 0304 or schedule an appointment and come in for a cup of tea and a chat. We’re confident we have an expert who can help you.