Are you a limited company director and planning to buy, move or remortgage?
Here are 6 tips for Limited company business owners that could make it quicker and easier for you to obtain a mortgage.
Don’t leave the finance until last, with a little preparation and planning you could save yourself valuable time and money, not to mention some stress as well.
We recommend thinking 6-12 months in advance to get all your ducks in a row.
Watch the Video below or scroll down to read the blog!
Hello ladies and gentleman. Gary Das here of Active Mortgage and today I am bringing you six tips for limited company business owners, and these six tips have come from the clients that we’ve had the most success with over the last two and a half years, from more than a £100 million in lending and that’s from both of my businesses.
TIP 1
So, tip number one is how mortgage lenders are going to assess your income and they can do that in three ways or they’re going to use three key bits of information. One is going to be your SA302, which is going to confirm your salary and your dividends. They are now also referred to as a tax calculation and we would need that along with your tax year overviews. The other method of assessing your earnings or understanding your earnings, is your company accounts where that will confirm your salary and your net profits after tax before dividends, so I recommend having SA302 tax calculations and company accounts for the last couple of years ready when you want to apply, for your mortgage or ready when you’re thinking about applying for a mortgage.
TIP 2
Tip number two is relating to having one year’s accounts. A lot of my clients have one year’s accounts. Perhaps they were previously employed or maybe they were previously a sole trader and they’ve made the transition to becoming a limited company. You’re going to need to have a full 12 months trading.
TIP 3
Tip number three is when we’re looking at company accounts, the one thing I am always keen to look at is your balance sheets because I want to see, as does a mortgage lender, that your assets outweigh your liabilities because if you owe more than you have, your company could in the eyes of a mortgage lender go bust tomorrow, so it makes it almost impossible for you to get a mortgage.
TIP 4
Tip number four is about directors loans and amortisation. I get many people coming to me asking can I use this as a proof of income? Can I utilise this to justify how much I can afford and the answer is currently no because you put money into your business and you’re now drawing it back out as a loan? You know you loaned it to your business. Lenders want to use salary and dividends or salary and net profits.
TIP 5
Tip number is about for growing businesses. Now back in 2015 when I wanted to move my family into our dream home, I found that my mortgage lender would only use salary and dividends and worse still as a growing business, they were going to average them over the last two years. Now my latest years net profit was higher than previous years, so I wanted to use my latest year and I found that there are lenders out there for a growing business who can consider your latest year salary and dividends, or your latest years net profits. The outcome of that is you can potentially borrow more money and you could buy a bigger home, or borrow more money to home improve whatever it might well be, so if you’re looking for largest mortgage possible and finding that you’re not having a great deal of success then that could benefit you.
TIP 6
Tip number six is for decreasing profits and this is equally a bit of a problem, because if your profits are decreasing or your income is decreasing from your limited company then mortgage lenders are going to ask questions, because they’re concerned is it going to happen next year or the year after that, so certainly make sure that your business and your income is in a strong position when you start thinking about applying for a mortgage.
So I hope these tips have been useful to you. Please do leave me any comments if you would like me to answer them and I have an easy next step for you. You can go and buy a copy of my book the Self Employed Mortgage Guide, which is an Amazon bestseller, or you can visit our website active mortgages where we’ve got a free download that is, the Seven Mistakes That Most Limited Company Business Owners and Entrepreneurs Make When Applying for a Mortgage, and in there as well I’ve put a list of the key documentation that you need to have and the mistakes that we often find with that documentation, so that you can get them already and you can make your life easier.
Thank you very much indeed and we look forward to seeing you on the next one.
Here is What to do Next:
If you liked this blog we think you will love this one we did on Limited Company Directors can get a bigger Mortgage by using Net Profits!
OR
If you’re looking to go a step further, you can go and download your FREE copy of – 7 MISTAKES BUSINESS OWNERS AND ENTREPRENEURS MAKE THAT COULD JEOPARDISE YOUR MORTGAGE
OR
Speak to our mortgage advisers and give us a call on 01245 850165
