Seeking a mortgage as a Director of a business can be a little more complicated than if you were an employee at the company.
Whether you are a director of a sole trader, partnership or limited company, the type of director you are will determine how your ‘income’ is assessed on application.
Mortgages are based on affordability. It can be less obvious to lenders what your actual income is, therefore, it’s less obvious as to your ability to make repayments. A broader view beyond the tax assessment into using retained profit, accountant projections and contracts is needed.
Every business is different. When securing your mortgage as a director you’ll need a lender who will look at you as an individual and who’s criteria matches your requirements.
What you need to know:
- Your trading history is one of the biggest things that will be assessed. You’ll need a minimum of one year’s accounts, though the more you have the wider your options.
- You’ll need a minimum 5% deposit, if you have more than a years trading accounts and a clean credit history. However, if not the you may need a minimum of 15% deposit.
- How much could borrow will be assessed in different ways depending on the type of director you are. A sole trader will be assessed on net profit, a limited company director on their salary drawn plus any dividends, and a partnership director will usually be assessed on their share of the net profits.
Director mortgages can be complex but speaking with an advisor experienced in this area can make it a less painful and more seamless process. They can inform you of your options and know the lenders to approach based on your circumstances. Get in touch today and we’ll put you in contact with a specialist.