Our Self Employed customers have a wide selection of options, depending on how the business has been formed, and how they pay themselves. Mortgages for the Self-Employed are not necessarily more expensive, it just depends on which lenders are right for your individual circumstances.
As a Limited Company Director, we have a number of ways of assessing your income.
% of Net Profit
Your Shareholding will show your entitlement to the profit of the business - we have a few lenders that will use this, which can be a very favourable if you retain profit within the business.
Salary and Dividend
A more traditional means of assessment - simply the addition of the declared dividend and salary as shown both in the company accounts and your Personal Self Assessment - SA302
Some lenders will look at the level of Net Profit within the business, assuming the individual owns 100% of the business, or the ownership is between the applicants.
For most lenders you will need 2 full years' trading, and Company Accounts will be needed for assessment. If company profitability is improving, then the lenders will look to use an average of the last few years. If the profit is reducing then lenders will want to know why performance is deteriorating, and will take the last years profit in isolation.
Lenders are interested in your declared Net Profit figure, as shown either in your Business Accounts and/or your personal Tax Return.
Most Lenders will require a minimum of 2 full years of trading as a company, although we have some specialist lenders that will look at just 1 year of Business Accounts.
If your Net Profit is increasing each year, the majority of mortgage lenders will take an average of the last 2 or 3 years. If your Net Profit is reducing, lenders will typically take the last years Net Profit as the figure to calculate the amount you can borrow.
The rules are very similar to a Sole Trader, the Net Profit shown on the Business Accounts and/or your personal Tax Return - see the Sole Trader Tab for more details.
We will also need to know your % ownership within the partnership, typically it will be an equal share of the business, but we can only allocate your share of the profits to you.
We will look to acknowledge your understanding of the meeting and the process, especially your relationship with the risks involved. You would then have the option to proceed straight away, take the details away to discuss further or book in a second appointment to submit the mortgage application with the associated lender!