Mortgages for directors
Mortgages for directors are often among the most difficult to obtain because of the way many lenders view self-employed company directors. Self-employed borrowers tend to be viewed as higher risk by lenders because the process of proving income if you are self-employed is more complex than if you have an employer who can simply verify your income.
Most lenders apply different criteria to mortgages for directors for a variety of reasons.
Your company may not have a long trading history or reported accounts, or you may have retained some profit in your company for tax or investment purposes, but need your lender to consider this when they assess your overall affordability. Whatever the reason, you might need specialist support when it comes to applying for mortgages for directors.
What are mortgages for directors?
Mortgages for directors don’t really exist. In reality, if you’re a company director, you will still be applying for the same mortgages as everybody else, but you will have to meet a different set of affordability criteria, which can vary from lender to lender.
Lenders look at all the mortgage applications they receive based on risk, and most tend to view self-employed and limited company directors as riskier prospects than those in standard employment, even if they have a proven and successful trading history. If you are a self-employed director, your income assessment will be based on your net profit, rather than your turnover and this will be average out of several years’ trading history if you have it. So, if you have taken steps to legally minimise your net profit on your tax return, this could have an impact on the amount you could borrow.
If you are a limited company director, your income will be assessed based on the salary you take, along with any dividends or profit shares. Again, this can have an impact on your application if you take a base salary up to the tax-free threshold, retain profits and draw dividends, as lenders will consider only the income you withdraw from the business.
Different lenders have different rules, so working with an expert mortgage broker with experience in arranging mortgages for directors will ensure you get the right advice to help you get ready prior to submitting your application.
How do mortgages for directors work?
Applying for a mortgage as a company director is a relatively straightforward process, the trick is finding the right lender and preparing your application correctly. While you’ll still have access to the same lenders and mortgage products as everyone else, you’ll just need to prove your income in a different way.
All that lenders are interested in is your ability to pay. So, even as a company director, provided you can meet the lender’s criteria, you’ll be eligible for the same mortgage rates as anyone else.
To qualify for the best rates and most competitive deals, you’ll need to prove to the lender that you have a reliable, consistent income stream and can afford the repayments.
However, the range of mortgages available to you may start to narrow depending upon how complex your circumstances are.
In these situations, you might need a bit of specialist support to find the right mortgage and that’s where My Mortgage Pro can help.
We can connect you with an expert mortgage broker who specialises in mortgages for directors and can ensure you get the right advice to help you get ready prior to submitting your application.
Can I get a mortgage for directors?
In short, yes… if you know where to look and how to prepare your application properly. In fact, with the right help, you will be able to get access to the best interest rates and deals on the market.
It all depends on your personal circumstances.
It is possible to get a mortgage as a company director, provided you can demonstrate to the lender that you can afford the repayments and can manage your finances sensibly. This means proving you’ve got a steady income, but also doing things like making sure you’ve met any other outstanding credit or loan payments on time, ensuring all of your regular outgoings – such as utility bills and credit cards – are paid on time, and not taking on any new debt.
Also, the more money you have for a deposit, the better, as this will help to bring down the total amount you need to borrow and might even help you to get a better mortgage interest rate.
Contact us for more information about mortgages for directors
My Mortgage Pro is a professional mortgage information service. While we don’t give advice, we aim to provide you with simple, jargon-free, no-nonsense information about mortgages for directors to help you make the right choice. We can also connect you with a specially selected panel of leading mortgage advisers, who are authorised and regulated by the Financial Conduct Authority, who will provide advice tailored to your specific circumstances and help you find the right mortgage, fast.
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