Getting a mortgage as a director of a limited company tends to be slightly trickier compared to employed applicants. However, with the right advice, affordability and credit health, you should have plenty of options available. In fact, in some cases, you may be able to borrow more than you otherwise would be able to as an employee with the equivalent salary. How much you’ll be able to borrow will largely come down to which lender you choose and how they approach you and your company’s income. This is one of the areas where our specialist company director mortgage brokers can help you. Preparing yourself and making the right decisions can go a long way to ensuring you have a successful mortgage journey as a company director. So in this guide, we’ll explain everything you need to know about getting a company director mortgage.
Can I Get a Mortgage as a Company Director?
As mentioned above, it is certainly possible to get a mortgage as a limited company director, and you may even be able to borrow more than your personal income suggests. The thing to bear in mind is that it can be more difficult to get a mortgage if you’re a director of a limited company, and therefore we recommend seeking professional advice from our specialist advisors before considering an application. Let’s have a look at why it can be more difficult to get a mortgage as a company director.
Why is it More Difficult to Get a Mortgage as a Company Director?
There are various factors that can make it more complex to get a mortgage as a company director. The primary reason is that your income as a company director may not be as straightforward as a regular employee’s and lenders may assess your affordability differently. Perhaps you only pay yourself a small salary, topped up with dividends, and then retain considerable profit in the company? Perhaps your company’s profit is inconsistent? Perhaps your profit has increased considerably in the last year? Perhaps you’ve been trading for less than 3 years or you employ family members for tax planning purposes, both of which can deter some lenders.
All these reasons only usually become problems if you use a mortgage broker who isn’t experienced with this type of application. Our specialist advisors understand the complexities of your income and how best to present it to lenders. We also know which lenders will calculate your income and assess your affordability in the most favourable way to allow you to borrow more. Next, let’s have a look at some of the different ways lenders may approach a company director’s income and affordability.
How Do Mortgage Lenders Work Out a Company Director’s Income?
As a company director, you may pay yourself a small salary and a certain amount of dividends for tax purposes, and then retain further profits in your business. The majority of lenders will only consider these forms of income (the money that you actually take from the business) to work out your affordability. However, this may not be a fair representation of your financial situation. At Michael Usher Mortgage Services, we have access to a select number of lenders that will consider your company’s net profits (after corporation tax) as well as your salary, dividends and pension contributions. This could increase the amount you can borrow.*
How Much Can I Borrow With a Company Director Mortgage?
Providing you pass the lender’s affordability and credit checks, you should be able to borrow a similar amount as an employed person, typically around 4.5x your income. However, as we discussed above, your personal income may not be a true representation of your financial position. This is where it might make sense to apply to a lender that takes your company’s net profits (after corporation tax) into account when calculating your affordability. Let’s have a look at a typical case study to demonstrate the potential difference in lending between a salary and dividends-based mortgage and one that also takes net profits into account. Please note that the following example is based on the corporation tax rates of 2023-2024 and assumes no or low credit commitments and a 25-year mortgage term. Exactly how much you’ll be able to borrow may differ subject to changing lender affordability rules.
Company Accounts:
| TURNOVER: | £300,000 |
| COST OF SALES: | £100,000 |
| GROSS PROFIT AFTER SALES: | £200,000 |
| OPERATING EXPENSES INCLUDING DIRECTOR’S SALARY (£9,500): | £76,500 |
| TOTAL NET PROFIT: | £123,500 |
| CORPORATION TAX: | £28,978 |
| NET PROFIT AFTER CORPORATION TAX: | £94,522 |
| THE CLIENT TAKES | £50,000 IN DIVIDENDS |
TOTAL INCOME = £9,500 SALARY + £50,000 DIVIDENDS = £59,500
Difference in Lending Potential:
‘Salary and dividends’ mortgage = approx. £287,000
‘Salary and net profits’ mortgage = approx. £468,000**
What Do I Need to Get a Mortgage as a Company Director?
Every lender will want to see solid proof of your affordability, but exactly what they’ll require may differ. If possible, we would recommend that you have your company accounts, salary and dividends, and personal tax calculations to hand. You’ll typically want to have at least 1 year’s worth of these documents but some lenders may require 2-3 years. Having your last 3 months’ business bank account statements can also help and may be required by some lenders.
How a Company Director Mortgage Broker Can Help You
As you’ve seen in this guide, the approach to getting a mortgage as a company director is a bit different than that of an employed person. Also, the amount you’ll be able to borrow may vary widely from lender to lender depending on how each one assesses your financial situation. Therefore, it’s highly recommended you seek professional advice from a mortgage broker who is experienced with company director applications. Approaching the wrong lender for your situation may cause you to be rejected, which can damage your credit score. And even if you are accepted, approaching the wrong lender could mean you aren’t able to borrow enough to buy your desired property. Our experienced company director mortgage brokers have access to products from across the market and we understand the criteria of each lender. This means we’ll be able to recommend and apply for the most appropriate mortgage product for your circumstances and needs.
Another crucial aspect that our company director mortgage advisors will help you with is creating your application in the most appropriate way. One of the main worries for directors of limited companies is not being able to give lenders a true and fair representation of your overall financial situation. Our advisors understand the intricacies of your income and company accounts, so we’ll be able to guide you through the process and give you confidence every step of the way.
How to Choose a Company Director Mortgage Broker
Not all mortgage brokers are created equal, and as a director of a limited company, you don’t want to make life even more difficult for yourself by choosing an inexperienced advisor. The right advice will go a long way to ensuring you’re able to buy your dream home, so make sure you ask the following questions before choosing a mortgage broker:
- How experienced are you with company director mortgage applications?
- How many mortgage lenders do you have access to?
- Will I be able to speak to you in person if I need to?
- Do you provide a paraplanner to help speed up my application?
- Are you CeMAP qualified?
- Do you have an insurance team to help protect my mortgage?
At Michael Usher Mortgage Services, we come out on the right side of all these questions. We’ve been helping company directors get on the property ladder for over 30 years, all our advisors are CeMAP qualified, and we have access to a wide range of products from across the market. You’ll get a paraplanner alongside your advisor to help your application go smoothly and to keep you in the loop, and we can help you remotely or in person at our office on Frimley High Street. We also offer a FREE Insurance Service to help you find and arrange the correct policy and ensure your mortgage is fully protected
The Bottom Line
Being a director of a limited company shouldn’t deter you from getting a mortgage but it can make your application and choice of lender a bit more complex. Whether you qualify for a mortgage and how much you’ll be able to borrow can vary widely between lenders, mostly due to their differing criteria when it comes to assessing your affordability. It’s crucial that you choose a mortgage broker who has considerable experience with company director mortgage applications. A good mortgage broker will be able to look at your personal and company accounts and gain a firm understanding of your true financial situation. A select number of lenders will consider your company’s net profits (after taxation) as well as your salary, dividends and pension contributions, which could enable you to borrow much more than mainstream lenders. Not all mortgage brokers have access to these lenders, so speak to our team if you want to explore your options properly.
We offer a comprehensive range of products from across the market, including specialist deals that aren’t available directly from lenders. We’ll aim to find you a company director mortgage that suits your needs, and then guide you through the process and liaise with your lender, estate agent and solicitor to ensure your application goes smoothly. We can also help to protect your mortgage with our FREE Insurance Service.
Talk to one of our friendly mortgage advisors for free to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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Your home may be repossessed if you do not keep up repayments on your mortgage. There may be a fee for mortgage advice. The precise amount will
depend on your circumstances but will be agreed with you before
proceeding.
There are additional stamp duty costs involved with property development. It is advisable to speak with an accountant and/or tax advisor to clarify your tax position before proceeding.
* This is based on the example case study represented in this article, which is typical (as of 2023-2024) but not guaranteed. How much you can borrow will depend on your specific situation.
** This example is based on the corporation tax rates of 2023-2024 and assumes no or low credit commitments and a 25-year mortgage term. Exactly how much you’ll be able to borrow may differ subject to changing lender affordability rules.
