Mortgages for company directors aren’t always straightforward, as it can be harder for lenders to determine how much you can afford to borrow. The application process for a director mortgage and the range of deals available should be the same as for any other type of mortgage. However, depending on your circumstances, it can be more difficult to get a mortgage if you’re a company director.
When assessing a company director’s mortgage application, lenders will usually look at how much salary is taken as well as any dividends received, as these can often make up a large proportion of a director’s annual income. Most lenders won’t take any profit retained in the company into account, although some specialist lenders may consider this.
Mortgage providers will usually want to see at least two years of income and tax returns, so when applying for a mortgage as a director, you should ensure that you have thorough records. Directors who don’t have several years’ worth of income evidence available may be able to boost their chances of having their mortgage application accepted if they have an excellent credit score and a substantial deposit.
If you need support applying for a limited company director mortgage, L&C are here to help. We’ll talk you through all the steps involved in getting a mortgage as a company director and scour the market to find the best deals available for your circumstances.
Director mortgage process
Applying for a mortgage as a director follows the same process as getting any other type of mortgage. Your best option is to go through a mortgage broker like L&C. Not only will we support you every step of the way, but we also have access to specialist lenders that you might not otherwise be able to apply to.
Director mortgage eligibility criteria
If you’re looking for a mortgage for a limited company director, it’s generally expected that you’ll have been trading for at least 12 months - although most lenders will usually ask for 2 to 3 years of income evidence. Ideally for most lenders, this would span a full tax year, but if you have 12 months of trading split over two tax years, some lenders will be happy to take a 12 month snapshot of income to assess your affordability.
Most lenders in the UK will only take your income and dividends into account, and won’t consider any profit that remains in the company. However, some lenders will use profit when assessing your affordability, so it’s important to check with a mortgage broker what criteria will be used.
When applying for a mortgage as a director, you’ll be expected to submit your finalised accounts and SA302 calculations from HMRC. Most lenders require that this comes from a registered accountant rather than the company director themselves. You will also be asked for details of your outgoings, and often will need to provide 3 to 6 months of personal bank statements.
You can use our mortgage calculators to work out what mortgage you can expect to get and how much your monthly repayments are likely to be.
Director mortgage deals
As with other types of mortgage, you’re likely to get offered a better rate if you have a bigger deposit. When it comes to securing a good mortgage rate, saving up a larger deposit, such as 25% of the value of the property, will put you in a much better position.
Whilst many lenders will take an average of your earnings over the last 2 to 3 years to assess your affordability, some may just take the most recent figures. If your income from the last year is significantly higher than average, it may be beneficial for you to look for a lender that uses this to assess your affordability.
If your company has made a loss, it doesn’t mean you can’t get a mortgage, but it might act as a red flag for lenders when looking for evidence that you will be able to afford your monthly repayments. A mortgage broker like L&C can help you to find the lenders that are most likely to offer you a mortgage, based on your own situation.
Director mortgage repayment plan
Repayment of a director mortgage works in the same way as any other type of mortgage. If you have a fixed rate deal, you’ll pay the same amount every month for the duration of your term, whether that’s 2, 5 or 10 years. This may offer some stability and peace of mind for company directors on a budget.
Alternatively, if you have taken out a variable rate mortgage, your repayments could change over the course of your mortgage term, depending on interest rates.
If you wish to make overpayments or need the flexibility to borrow back previous overpayments, for example if you have a seasonal business, then be sure to choose a mortgage provider that allows for this without any penalties.
Apply for a director mortgage with L&C
If you need a mortgage for a company director, L&C is here to help. You can search for all of the best mortgages using our online mortgage finder tool, and once you’ve found the right deal, you can complete your application at a time that suits you. Your case manager will support you at every stage of the application process.
We’ve got years of experience dealing with this type of mortgage and know exactly what sort of information lenders need from you when you apply for a mortgage as a company director, so get in touch today to find out how we can help.
