Mortgages for Limited Company Business Owners
Mortgages for limited company business owners are readily available with with high street lenders. However, Limited Company borrowers often have difficulties understanding the different sets of criteria, each lender requires, which can vary quite dramatically from one lender to another.
Maybe your company hasn’t got a long history of trading, or you are unsure of what you can use as income. Perhaps you retained some profit in your company for tax efficiency or investment purposes and require a lender that will take into account your share of retained profits.
Mortgages for Directors
A minimum of 12 months is required in order to be considered for a mortgage.
Ideally you will have a full tax year’s set of accounts. If your trading year spans across 2 tax years, some lenders who will look at a projectiont rather than waiting for you to complete the second tax year’s accounts.
If you receive PAYE (pay as you earn) payments from your limited company, your mortgage lender will consider the gross (before tax) level of those payments as income for mortgage purposes. Many limited company directors are advised by their accountants to take a minimum level of PAYE and most of their income in the form of dividends – this is where the complications arise.
*IMPORTANT NOTE – You can not pay yourself a high salary for 3 months, using PAYE and expect the lender to use this for affordability purposes! A Limited Company Business Owner is still self employed in the eyes of the mortgage lender.
Dividends are a share of a limited company profits paid to shareholders by the company on the advice of the Board. Dividends are subject to income tax and will be considered as part of the director’s income by alot of mortgage lenders.
If a limited company makes a profit which is not taken out as dividends, this is known as retained profit.
Mortgage enders can view that retained profit has not been declared as a dividend and that the business may use it within the near future. Having said that, with mortgages for limited companies there are mortgage lenders who will consider retained profit’s if other criterias are met.