Company Director Mortgages

If you run your business as a limited company, it can be difficult to know where to begin looking for a mortgage. The lending criteria implemented by many mainstream lenders is not geared towards self-employed applicants and, when it comes to the more complex finances of limited company directors, it can be even more difficult.

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Author: Carl Shave - CEO and co-founder
Last updated: 16 Jul 2024

Getting a mortgage as a company director

Be assured that a range of lenders out there will offer mortgages to limited company directors. A few of the big high-street names are moving in the right direction regarding this type of lending, but typically it’s the smaller, more niche corners of the market that offer the most flexibility. It’s important to bear in mind that company director mortgage application criteria can vary between different lenders.

Generally, lenders will expect your company to have been trading for at least a year before you apply for a mortgage. Some lenders may make exceptions to this for certain professionals (doctors, for example) but, in these cases, it is usually because a contract can be used as evidence of future income.

Lenders will usually want to see your company accounts covering at least one full tax year, but often you’ll be asked for more – two or three years’ worth.

Sometimes, lenders are willing to look at a 12-month “snapshot” of your accounts rather than making you wait until the next tax year-end. This can apply when your company’s accounting year does not run April to April. Therefore, your first tax return does not cover a full trading year.

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Will I have to put down a bigger deposit as a company director?

When applying for a mortgage as a company director, you will not have to put down a larger deposit. In theory, you should have access to the same mortgage deals as any other borrower. This is typically up to 95% lending in straightforward scenarios.

Normally, larger deposits are required if you have a bad credit history. They can also be used to gain access to more financially attractive mortgage products.

Some specialist lenders, with more flexible assessment criteria, may require a larger deposit to be put down – limiting the maximum LTV to, for example, 85%. This will allow them to offset the increased exposure to risk in comparison to standard mortgage lending.

Be aware that it’s also common for most lenders to require larger deposits on larger loan amounts. On mortgages over £750,000, for example, a lender may restrict the LTV to mitigate the increased risk.

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How do I prove my income as a company director?

Most lenders will ask you to provide full, finalised accounts and/or SA302 year-end tax calculations from HMRC. Lenders usually need your accounts or SA302 to cover at least one full tax year. However, it’s common for them to ask for two or three years’ worth of accounts.

Lenders will typically require your accounts to be certified by a qualified accountant. They may also ask for copies of your business and/or personal bank account statements. This is usually the past three months’ worth.

If a lender asks for more than one year’s accounts to verify income, they will, in most cases, take an average to calculate your income figure. This can be frustrating if your business has built over the period concerned. It’s worth knowing, therefore, that particular specialist lenders can base their income figures on the most recent year’s results.

Who are the best mortgage lenders for company directors?

We can’t give a list of the best lenders to use, as each application is different. What works for someone else may not work for you. Furthermore, lending and assessment criteria varies from lender to lender. This means that certain lenders may be more suited to people with smaller deposits or bad credit, for example.

Lenders with experience in these mortgages understand that your base salary provides an incomplete picture of your company’s profitability. As mentioned, different lenders still vary in how they will calculate your “income”.

Most lenders, particularly mainstream ones, will only consider your income to be that which you’ve drawn from your company. Therefore, when assessing your application, they will consider the salary, plus dividends, drawn.

However, there are some specialist lenders who will consider your share of the company’s net profits as your income. This can make a significant difference in affordability calculation and the maximum loan amount.

Lenders usually base the maximum total borrowing on a multiple of your verified income. Income multiples fall broadly in the range of about 3.5 to 5 times your income.

The exact figure will vary from one lender to the next and can also vary depending on circumstances. For example, past credit problems may mean a lender will apply a lower multiple, therefore reducing exposure to risk by limiting the lending amount.

Here’s an example of how different methods of income assessment can significantly affect the amount you could borrow:

Let’s say that your share of the company’s net profits is £250,000, but you only draw salary and dividends totalling £50,000.

Assuming an income multiplier of 5, a lender basing your income figure on salary plus dividends would lend a maximum of 5 x £50,000, i.e. £250,000.

A specialist lender, basing their income figure on the share of net profits, would lend a maximum of 5 x £250,000, i.e. £1.25 million.

Using a mortgage broker as a company director

Company director mortgage requirements vary between lenders and navigating the market can be difficult at times. Therefore, speaking to the right broker can prevent your options being restricted. This means that you can access the best mortgages for company directors.

A specialist mortgage broker will be intimately familiar with the criteria, preferences and processes used by mortgage lenders. Once they have taken a close look at your circumstances, they will know exactly which lenders will be most suitable to approach, as well as which products you should look at.

They will also have access to a range of deals that are not visible on the open market, often approaching lenders informally before an application. This helps them understand how flexible they can be in your particular circumstances.

At Just Mortgage Brokers we have years of experience in helping limited company directors get mortgages. If you want to explore your options or if you have a query, get in touch today.

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Mortgages for Company Directors FAQs

A bad credit history can make it difficult for all kinds of mortgage applicants, not just company directors. However, it’s still possible to obtain a mortgage.

When assessing a mortgage for a company director with bad credit, lenders will look at two things:

  • The severity of the bad credit event
  • The length of time that has passed since it occurred

This means that the more severe and recent the event, the more effect it will have – which could limit your borrowing or increase the rates offered.

Luckily, many lenders will extend mortgages to people who have had credit issues. Typically, you may have to accept a slightly higher interest rate or provide a larger deposit. A lot of these specialist lenders can only be accessed through a broker. Therefore, if you want to explore your options, get in touch today.

Just because your company has declared losses doesn’t mean you can’t obtain a mortgage. However, it can make finding the right lender more difficult, because most lenders will perceive you as a higher risk.

As with bad credit, there are specialist lenders available who are prepared to get you a mortgage. It’s all about knowing exactly where to look and who to approach based on your circumstances.

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