Mortgages For Company Directors

In this guide, you’ll find everything you need to understand mortgages as the director of a limited company. We’ll explain your different options, what can be counted towards your income, and more. 

Do I count as self-employed when I’m the director of a limited company?

The short answer is: yes. If you’re operating as the director of a business that you own or co-own, then you count as self-employed in the eyes of most mortgage lenders.

But don’t worry! You can still apply for a mortgage, and are just as likely to be approved, as long as you can provide the right information. The process may be a little more complicated, but if you’re able to secure the mortgage you need it will be worth it.

Why might it be harder to find a mortgage for a limited company director?

In general, directors are advised to take their income in the form of dividends, rather than Pay As You Earn (PAYE) payments. This means that your personal earnings depend solely on the performance of the company, which can fluctuate.

Or maybe rather than paying dividends, your limited company is keeping retained profits, which doesn’t count towards your income. Or perhaps you simply haven’t been trading for a very long time, and don’t have enough accounts yet?

All of these factors make your income more complex than people who are employed, which means it takes mortgage lenders longer to process, understand and work out your affordability.

This process can reduce the number of mortgage lenders who are willing to consider your application. Luckily there are plenty of specialist mortgage lenders who are prepared to take the time with applications of this nature - and our team of mortgage experts know who they are.

If you make an enquiry, a member of our mortgage team can contact you to discuss your options.

What do I need in order to apply for a mortgage?

As the director of a limited company, there are a few simple things you’ll need to be able to provide as part of your mortgage application:

• Your trading history

• Proof of steady income

• A good credit score

• A healthy deposit

Read more about what mortgage lenders may need from you in our guide: What Mortgage lenders Look For In Applicants.

How long do I need to have been trading for?

Some mortgage advisors will claim that you need three year’s worth of accounts in order to apply for a mortgage. That may have been true in the past, but not anymore.

There are now plenty of specialist providers who are perfectly willing to approve applications with only twelve months of trading accounts, or fewer. These records can span two different tax years, as long as they give an uninterrupted twelve month view of your company’s earnings.

If you’ve just become self-employed and have limited trading history and accounts, it’s still possible to be approved for a mortgage as long as you can provide some future income projections that prove your business is heading in the right direction.

How can I prove my income?

One thing that’s guaranteed to hamper your mortgage application is evidence of varying income. The majority of lenders will want to look at a broad average of your income, which can be good or bad depending on your circumstances.

While each lenders’ requirements may differ, there are three types of document you will generally need to provide as proof of your income:

• Between one and three years’ of accounts, certified by an accountant

• Copies of statements for all your business and personal bank accounts

• An SA302 tax calculation and tax year overview, available online from HMRC

Most of the time, lenders won’t consider retained profit to be part of your earnings. This is why they generally prefer to look at dividends as a measure of income instead.

What deposit do I need?

General advice for deposits says you’ll need 10-15% of the total property price that your mortgage is for. However, there are a few other variables to consider when you are a self employed business owner:

• Your credit history

• How long your limited company has been trading for

Issues with your credit history that might raise red flags would include any county court judgments (CCJs), late payments, bankruptcy or repossessions.

While it may not change your chances of being approved for a mortgage if your company has been trading for a longer period of time, it can allow for a lower deposit or give you access to a better rate.

Can I borrow based on retained profits?

Yes, it’s possible. The problem with retained profit (as opposed to income paid to employees as PAYE, or to directors through dividends) is that most lenders won’t consider the money you yourself have actually earned. Instead, they think of it as a safety net to support your limited company during difficult times. 

If you want a lender to count retained profits towards your earnings in order to get a mortgage, then you’ll probably need to get a mortgage with a specialist lender rather than a mainstream one. Do be aware they’ll want to be absolutely certain of your finances before they make a decision, and may ask for extra proof of you and your company’s income.

Can I still get a mortgage if my business has made a loss?

Starting a new company is hard work. Even the most successful ones can expect to make a loss at the beginning, and sometimes won’t see profits for years.

Some mortgage lenders may be put off if your accounts show a loss for your limited company. But that doesn’t mean it’s impossible to get a mortgage. We work with specialist brokers who understand the difficulties with owning and running a small business. If your losses are typical of the teething problems all companies go through, or if they are older than the last two years, then you still may be able to have your application approved.