Mortgages For Limited Company Directors

It’s a common myth that a company must have been trading for at least three years’ in order for a director to get a mortgage, but that isn’t true. Some mainstream lenders might impose this criteria, but there’s plenty of lenders who will consider you without three years worth of accounts.

In fact, there are specialist lenders who’ll be prepared to approve applications from people who are self-employed with just one year’s worth of accounts, or in instances where the director actually classes as a contractor. The key thing for lenders is that you can demonstrate your earnings, that can be a 12 month view of your accounts rather than a tax return.

If you’ve just gone self-employed and have limited trading history and accounts, it’s still possible to be approved for a mortgage as long as you work with a specialist mortgage broker. They’ll be able to advise you on the kind of evidence the lender will need to prove your income. Our Mortgage Experts have made plenty of mortgages possible for limited company directors with limited accounts, so get in touch to find out your options.

One thing that’s guaranteed to hamper your mortgage application is evidence of varying income. The majority of lenders will want to look at a broad average of your income, which can be good or bad depending on your circumstances.

While each lenders’ requirements may differ, there are three types of document you will generally need to provide as proof of your income:

• Between one and three years’ of accounts, certified by an accountant

• Copies of statements for all your business and personal bank accounts

• An SA302

 Most of the time, lenders won’t consider retained profit to be part of your earnings. This is why they generally prefer to look at dividends as a measure of income instead.

The amount of deposit you’ll need to put down depends on a few different factors: what your credit history is like, and also how long you’ve been trading.

Lenders will always want to see your credit history to decide how much deposit you’ll need to put down on your home. If you’ve had credit issues in the past, for example late or missed payments, CCJs, IVAs or a repossession, this will impact how much a lender will let you borrow and how much deposit you’ll need. Usually, the better your credit history, the less you’ll need to put down on a deposit. A larger deposit will also mean you’ll generally get access to the best mortgage rates.

The issue around getting a mortgage using retained profits is that many high street banks and lenders want you to only borrow money based on money you’ve personally earned yourself, rather than your business.

And this is why so many company directors get turned down when they want to get a mortgage this way.

If this is the way you want to apply for a mortgage, a specialist mortgage broker will be a better option.

Having a bad credit history can add complications to a company director’s mortgage application.

The biggest challenge you’ll face is that the number of lenders who will consider your application is lower than for directors who have an excellent credit rating. Sometimes when starting a business, you can hit financial difficulties in the early days. It happens, especially during turbulent times and during the start-up phase. Some of the world’s most successful businesses came close to going under before hitting the big time. So this shouldn’t mean you can’t get a mortgage.

But to many mainstream lenders, bad credit and self-employment make an application complicated.

But it’s entirely possible to get a mortgage as a company director with a bad credit rating. You just need to work with a specialist broker (like us!) who understands the complexities of your financial circumstances. You can get a full picture of your credit file with checkmyfile. It’s free with a 30-day trial (usually £14.99).

Yes, you can still get a mortgage if your business has made a loss. A lot of mainstream lenders might turn you down, but it’s not impossible. 

Specialist lenders are in a better position to understand the specific circumstances surrounding the losses and might consider approving a mortgage based on an individual scenario.  Especially if the losses weren’t in the last two years.

Yes, you can get a mortgage even if you’ve recently changed your trading style. But most lenders will see this as a brand new business, so you’ll have the same limitations as you would if you’d just started out with no (or few) accounts.

If you’ve recently changed your trading style, for example, from a sole trader to a limited company, lenders will still see this as a new business, regardless of how long you’ve been trading under your previous style.

Specialist lenders are more likely to be flexible and look at your unique situation and consider you. Make sure you speak to a specialist mortgage broker who’ll know the lenders to approach.