Company Director Mortgages
As a UK company director, you might assume it is easy to get hold of a mortgage. But as many people before you have discovered, getting a mortgage as a company director can be challenging. Part of the difficulty comes from the fact that self-employed applicants fall under different criteria. Part of it has to do with the more complex finances of company directors, or that they can be seen as high risk.
There is help to be found. On this page, we are going to take you through some of the important information you will need to know, and answer a range of questions relating to getting a mortgage as a company director.
The Application Process
You probably have an inkling that the application process must differ from a normal one. But how? Let’s look at some of the details of the application process now.
First of all, bear in mind that there are some similarities between the normal application process and one carried out by a shareholding company director. For both, you need to provide evidence of all income sources, as well as other records. That will require additional paperwork, but it is essential not to overlook this part of the process.
Lenders will also typically ask you to have your accounts certified by a qualified accountant.
For any mortgage, it’s important to know how your income is going to be calculated. Not only does this help you to prepare for the application process. It also ensures that you are aware of what kind of mortgage products are available to you. Having an understanding of how your income is to be calculated will really help the process along.
To calculate income, you will merely need to provide a few document types. Some lenders will ask for more proof than others, however. But generally, you will need the following:
- Your SA302 – you can request or download this from HMRC easily at any time.
- Finalised annual accounts – as we have seen, this should be signed off by an accountant.
- Latest 3 months of bank statements – to help calculate and prove your income most recently.
Generally you will need to provide at least a couple of these. As we have said, it does vary from lender to lender, so always check beforehand with each one.
What Information Does The Lender Need?
It’s obvious enough that you have to provide certain information to the lender in order to get a mortgage. That is true of all kinds of mortgages, and it’s certainly true of one for a company director. The main information you need to provide is the income proof that we have outlined above.
On top of that, any lender might always ask you for some further evidence. There might be specific instances where you need to show evidence of other accounts you have, or other businesses or self-employed ventures. As a company director, you should ideally have these to hand regardless.
How Much Can A Company Director Borrow?
Now on to the really interesting part – how much can you actually borrow as a company director? Lenders always assess this based on income. That is still true for a company director, as we have seen with the information you need to provide.
Lenders will also assess your outgoings now, in order to make a more secure conclusion about the state of your finances. The idea is that outgoings are just as important an indicator as income.
With that in mind, a company director’s income will be based on what salary they take from the business, rather than the profit itself.
How Do You Arrange A Company Director Mortgage?
To begin the process, you will likely want to make use of a broker. Brokers like us specialise in ensuring that you find the right mortgage. They have access to a wider range of mortgages, and they can help you to find the most suitable mortgage option.
Whether or not you go through a broker, you then need to leaf through your available mortgages based on your finances and what you hope to borrow. Then it’s a case of getting together all of that information that we mentioned above, and applying.
You should bear in mind that the process can take some weeks. In the meantime, it’s a good idea to keep your options open just in case.
You should have a deposit together in time for the application. As with any deposit, you should aim to have as much as possible to put down to begin with.
As you can see, mostly it is very similar to getting a mortgage in the normal way. But if you are a company director, you should bear in mind the differences that we have looked into here. You should also consider whether you might be in the best position to pay it all back in time.
That will mean looking at the future of your business, not just your own finances. If you are not careful, you could land yourself and your company in trouble, so take care.
Do The Rates Differ?
The deposit is not necessarily any higher for being a company director. Similarly, the rates for a company director are exactly what you could expect as normal. They are not treated in a different way, nor are they calculated differently.
As ever, you should make sure you are aware of the rates before going in.
If you are considering getting a company director mortgage, consider getting in touch with us today to discuss your options and find out more.
Your home may be repossessed if you do not keep up repayments on your mortgage.