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Obtaining a mortgage when you’re a limited company director can be complex for many reasons. It can be helpful to talk to a mortgage broker early on, letting you focus on your business, while they liaise with lenders on your behalf.
Here are three of the most common questions we get about finding a mortgage for limited company directors.
When are limited company directors considered self-employed for mortgage applications?
If a director owns 25% or more of a company’s shares, then they are generally considered to be self-employed by mortgage lenders.
If a company is new and hasn’t been trading for long. If they don’t have two or three years’ worth of accounts, it may mean mainstream lenders are less willing to offer a mortgage.
There are plenty of specialist lenders who will consider mortgages for companies even if they haven’t been trading for three years.
How do mortgage lenders assess income?
Another thing that can make obtaining a mortgage as a limited company director more difficult is knowing how to prove income and what can be classed as income. For example, you could have retained profit and want to use that as a source of income. Some lenders will use a director’s salary and net profit and other directors’ salaries plus dividends.
A business owner might not have withdrawn all the profits and wanted to use those retained profits to get a mortgage, however many lenders refuse to accept retained profits as income.
How much deposit is needed for a limited company mortgage?
The deposit needed for a company director will vary depending on their unique situation. If they have good credit and have been trading for over 2 years then they could only need a 5% deposit. Having a bigger deposit will always give more options but isn’t achievable for everyone.