Getting a house mortgage being a company Director.

[Stair man]

Good Afternoon, i have been running my ltd company since December last year so i am the Director and also employed by the company as paye. If i wanted to get a mortgage would the same rules apply like self employed where you would need 2 or 3 years accounts. If one of my employees wanted to geta mortgage they would have to supply 3 months wages slips, just wondered if the same would apply for me as i get wage slips too. Many thanks in advance.

 

[johndon68]

Are you a one man band with 100% of the shares? It's been a good few years not but, when I got my current mortgage, as I owned more than 50% of the shares, my lender (Lloyds) asked to see three years of company accounts, wage slips were not enough for them.

 

[DavidWH]

Currently in the midst of a mortgage now.

2 years accounts, accountants certificate, 3 months of pay slips, last two P60's, and a copy of the last two self assessments.

To be honest, fairly straight forward, the broker we're using are doing the running about.

 

[tony84]

If you are a company director and own more than 25%, you would generally be treated the same as a sole trader and would need 2 years accounts/self assessments.

There are a few lenders who will work from 1 years accounts/self assessment. Some do it as standard (but their rates are higher) others do it on a case by case basis and you can get normal rates potentially.

The argument about your employees getting a mortgage easier is one we hear all the time and you are right. But they also get sick pay if they are ill, redundancy pay if the business goes under, holiday pay, they are not liable for any claims etc. I dont disagree with the argument, but it is the only way a lender can tell your income. They could see £10k hitting your account every month and then at the end of the year you might have a bill for £120k that does not show up until the accounts are done.

 

[gpietersz]

@tony84 if you change the structure of your business (e.g. sole trader incorporates, company replaced by a new one etc.) but continue the same business, will lenders accept accounts from the old structure?

 

[tony84]

Some will if the reason for change is tax purposes, but not all. Most would want to see one years trading as the new business. It shouldnt be a deal breaker though, we have had a few of these go through over the years.

 

[Gordon - Commercial Finance]

@tony84 I’ve been thinking about this myself recently. Do the last few years of accounts need to show a profit after tax? And is income still assessed by salary plus divs or is it based on the profit of the company?

Also, what’s the current market rate for income multiples? Is it 5 times household income or 4?

I have been giving some thought to increasing my salary to make getting a new mortgage a bit easier (and I understand the extra tax implications), but by the sounds of it I would have to declare that I owned the company who is my employer anyway, so it wouldn’t really make a difference is that correct?

 

[DavidWH]

Saying that, the lender has gone back to our accountant today with more questions.

Although I believe this is more related to Covid and how we are planning to trade through the uncertainty.

 

[tony84]

@Gordon - Commercial Finance

If the company shows losses there is a possibility it would get flagged up and be a problem.

Pretty much 4.5x income is the cap, hopefully once Corona sorts itself out we can get closer to 5 again.

A higher income is a higher income regardless of who owns the business. But you could not give yourself a pay rise/pull more money out one month and then use that to apply for a mortgage the next, you would need to wait until it was reflected in your self assessments.