Company Director Mortgage
Being a company director is a position a lot of people desire, you are in the driving seat when it comes to making decisions and you have the final say, however, the same can’t be said for getting a mortgage. At the best of times, applying for a mortgage can be an extremely rigorous process that isn’t always a walk in the park and unfortunately, your high profile position will not always benefit you in front of a mortgage provider.
It seems odd that you might struggle to get a mortgage more than those who you pay a salary to, but the difficulty is usually down to proving your income.
Who is Eligible for A Company Director Mortgage?
Generally, you will need to have been trading for at least a year if you are looking to be considered for a company director mortgage, although there are some exceptions to this if you have a certain profession. As well as this, lenders may also require you to produce accounts covering one full tax year (at least), so when you are looking to apply, it’s worth knowing this and being equipped to avoid any further delays in the process.
Why is it Difficult To Obtain A Company Director Mortgage?
When it comes to getting a mortgage, your affordability is one of the main things that is looked at to determine whether you will be accepted or not. As a company director, your income is likely to be in a higher bracket, so you may assume you are the perfect candidate for a mortgage. However, some company directors tend to maximise their tax efficiency and split money from the company into salary and dividends, for example. This can distort your income and make it difficult for lenders to assess.
So, how will your income be assessed? Well, most lenders will only consider the money that has been drawn from the company as your income but some may also consider your share of the company’s net profit as your income.
This is an area within mortgage application that doesn’t change because of your position. Typically, deposit requirements for company directors will be the same for other borrowers and they should have the same loan to value ratio (which is usually up to 95%), so with a 15% deposit, you will be considered by the majority of lenders. It’s worth knowing that specialist lenders may require a larger deposit.
How Much Can You Borrow?
Like most mortgage agreements, lenders will base the amount they will lend to you on the income you would have been asked to prove. The exact figure you can borrow will largely depend on your personal circumstances but broadly speaking, lenders will loan around three to five times your income.
Your credit score will also influence the amount you can borrow. If you have a lower credit score, you may be disadvantaged when it comes to the amount you are allowed to borrow, because a lender may see you as too much of a risk.
If you are looking for more information or you are wondering if you are eligible for a company director mortgage, then get it touch today.