Securing a mortgage can be stressful at the best of times, but it can be even more so when you are the director of a limited company. Some mortgage companies may not be willing to understand your income fully and may incorrectly inform you that you will not be able to secure a mortgage.
Here at RJF Accounting, we speak to many company directors who are bamboozled by the process and need assistance getting their financial records to secure that all-important mortgage. This guide will provide everything you need to know if you are a limited company director seeking to understand mortgages and answer the most common questions we are asked.
Is It Harder to Get a Mortgage as a Company Director?
There is no simple answer to this question, as it all depends on the lender and their understanding of your income, which in turn depends on you providing them with the correct information in the required format.
As a company director, you might use tax-efficient methods to pay yourself, such as dividends. The issue with this is that your income can fluctuate, which is a risk to some lenders. The main factors that will affect your mortgage application are:
- Your credit history
- Length of time in business
- Size of deposit
- Joint/Single application
- How you pay yourself from your company
These factors can make it much harder for a lender to make a financial decision, leading to problems securing the mortgage.
How Can an Accountant Help Me Secure a Mortgage?
A good accountant can help you secure a mortgage in many ways and in ways you might not always expect. Despite not being part of the lending decision, they can help you leading up to the application and during the process.
Preparation of the Right Documents
As the old Scout’s motto goes – be prepared! Approaching a lender with everything you need ready and presented how they need it will save you a lot of time and effort and could make the difference between getting a mortgage and being declined. A good accountant can help you get all the relevant documents in order, including:
- SATR history
- Full accounts history
- Profit/Loss statements
Some lenders will require more in-depth reporting, and some will be happy with tax returns and signed accounts; it all does depend on the lender.
Adds a Layer of Credibility
Most lenders now will not accept loan or mortgage applications from self-employed people unless they have an accountant. Why? Well, most lenders will want to know that your financial affairs are in order and that the information they are being provided is correct. This has become more prevalent since the financial crash of 2007/8, where part of the problem was to do with self-certified mortgages and the subsequent defaults that they led to.
Presentation Is Everything
Presenting your financial position in an easy-to-digest and understandable format could be the crucial difference between approval and application rejection. A good accountant will know what lenders are looking for and be able to present your whole financial position in an easy-to-understand and easy-to-process format.
The size of a mortgage is primarily determined by income and affordability assessments. For self-employed individuals whose income may fluctuate, it is crucial to carefully examine their business cash flow and present a thorough analysis to the mortgage lender to increase the chances of a successful application.
Quick-Fire Self-Employed Mortgage Facts
- You will likely require a larger deposit if you are self-employed, possibly 10-15%.
- All lenders will require certified accounts to process an application.
- You will need proof of dividend payments or retained profits.
- You may need evidence of upcoming contracts, especially if you are a contractor.
- You will need to provide SA302 forms for the past two or three years.
Self-Employed Mortgage Help from RJF Accounting
RJF Accounting is here to help our clients get the most out of their business and get the advice they need regarding personal financial matters such as mortgage applications. We have a dedicated team in our Manchester offices that help with everything from preparing the correct documents to giving advice ahead of time to get your finances and accounts in order and ready for your mortgage application.
If you need assistance to secure a mortgage or are looking for more in-depth advice, you can call the team on 0161 5040629 or email us at email@example.com to see if we can help you get your plans off the ground! We are open Monday to Friday, 9 am – 5 pm!