Company Director Mortgages

In this article, we’ll explain how to get a mortgage if you’re a company director, different ways you can maximise your borrowing capacity and why speaking to a specialist broker can prove to be the best way to find the right mortgage for you.

Can a company director get a mortgage?

Yes, of course. As outlined below in this article, there’s a specific set of criteria required for company directors to follow and as long as you can do that then your chances of securing the mortgage you need should be as high as for any other applicant, regardless of their employment type.

Mortgages for limited company directors can be more complex than other types of self-employed mortgages, but they’re far easier to obtain if you know where to turn for the right advice. Speaking to a mortgage broker who specialises in people who trade this way could be the difference between mortgage approval and potential disappointment.

How do mortgages for company directors work?

To a large degree, company director mortgages work in much the same way as any other mortgage application. A successful application is one that shows you fit the lenders’ risk profile and can afford the repayments.

The complexities arise from the fact that many lenders (particularly those on the high street) often take a somewhat narrow view when it comes to assessing affordability and eligibility for self-employed mortgages of any kind.

This is purely down to their approach to risk but can result in you being rejected for a loan you know you can afford. Fortunately, there are plenty of specialist lenders who take a more flexible and pragmatic approach to assessing mortgages for directors.

Eligibility criteria

Eligibility varies considerably from one lender to the next, but you can expect the following factors to be considered:

• How long your company has been running: Most lenders prefer it to have been operating for two to three years or more. Nonetheless, it is possible to get a mortgage if it has been operating for less than a year. However, in these circumstances, you may not qualify for the lowest rates available as the pool of lenders willing to look at your application will be smaller
• Deposit amount: You will need at least a 5% deposit for this type of loan as the maximum loan to value (LTV) is 95%. A deposit of 15% or above will usually give you access to more mortgage lenders and, as a result, lower rates.
• Credit file: Lenders will assess your credit file and any bad credit will ring alarm bells. With that said, bad credit mortgages are available to company directors. But you will have fewer providers to choose from and might have to pay a higher rate, depending on the nature of your credit issues.
• Property type: You are more likely to be approved for a standard construction home. Both self-employed people and non-standard build mortgages are considered higher risk by lenders. So, when you put the two together, you limit your pool of lenders.

How is affordability calculated?

Affordability calculations are one of the main reasons why it is often best for company directors to find a specialist mortgage provider to maximise their borrowing capacity.

Some lenders will take an average of two or three years’ income, while others will just look at the most recent year. Typically, you can borrow around 4.5 times your annual income, sometimes more depending on your lenders’ approach to affordability.

As a company director, your accountant has probably advised you to take a salary up to the tax-free threshold, with dividends accounting for any additional income. This makes perfect sense for your tax bill but can cause complications when applying for a mortgage that wouldn’t apply if you were on PAYE. Particularly as most high street lenders consider this your total annual income.

Borrowing against retained profits

Some specialist lenders, however, will take retained profits into account. And this can make a huge difference to the amount you can borrow.

Let’s say your company has made profits of £200,000 for the year, but you have only withdrawn £40,000 as a combination of salary and dividends.

With a mortgage lender who would only allow for salary and dividends to be taken into account for income purposes (assuming five times income), you could borrow a maximum of £200,000. But a specialist lender who considers retained profits when calculating affordability might offer you up to £1,000,000 using the same income multiple.

You can get a rough idea of how much you could borrow using our self-employed mortgage calculator:

How to get a mortgage as a company director

Getting a mortgage as a company director doesn’t need to be overly complicated as long as you follow some important steps along the way. First, make an enquiry with us and we’ll arrange for a specialist mortgage broker to contact you who can help with:

• Preparing the necessary documentary evidence required. For a company director, this would mainly involve proof of income in the form of the last two to three years of certified company accounts and/or self-assessment tax statements (SA302s). You would also need the last three months bank statements – for both personal and company accounts
• Downloading and optimising your credit records. You can sign up for a free credit report trial and your broker can then help you identify any inaccuracies or outdated information that can be removed which could hinder your application
• Finding the best mortgage lenders. Specifically, those who have previous experience helping company directors secure the mortgage lending they need at the best possible interest rates available

How do I prove my income?

For company directors the key documents required to confirm your income would be: 

• Ideally the last 2-3 years certified company accounts from a qualified accountant 
• If only one year’s accounts available, a forecast or projection of future income
• SA302 statements and tax overview from HMRC
• Last 3 months bank statements both for your personal and company accounts

Who are the best lenders for business owners?

Some of the biggest names on the high street are quite prepared to offer mortgages to company directors. And some will even consider net profits as part of your annual income.

These include:

• Barclays
• HSBC
• Metro
  

(Correct as of the time of writing – August 2023)

But more than half of all UK lenders offer this type of borrowing, and often the best deals are with lenders who specialise in it.

A whole of market broker, like the ones we work with, will be able to find the best deal according to your individual circumstances.

Remortgaging as a business owner

If you already have a company director mortgage and are remortgaging, the application process will be very similar. It still makes sense to get advice, as it may be possible to increase your borrowing capacity or reduce the rate you pay by switching lenders and packaging your application correctly.

If your current mortgage was taken out before you became a company director, you may find the application process a bit more complicated. But there’s no need to worry. The principle of proving eligibility and affordability remains the same.

And if you have sufficient equity and profits, there is no reason why you can’t still get a competitive rate.

If you’ve changed your trading style during the period of your mortgage (for example, going from a sole trader to a limited company), most providers will view it as a new business. This can affect affordability and eligibility with some lenders due to distorted average income or too short a trading period.

Once again, with expert advice and support, you can still secure a good deal.

Get matched with a company director mortgage specialist

Specialist mortgages require specialist support. Even if you have applied and been rejected, by applying to the right lender, you might still be able to get a mortgage approved.

The first step is to find a specialist broker who understands this market, has contacts in the industry, and can act as an advisor and advocate.

Our free broker matching service will assess your personal situation, and that of your business, to ensure we pair you with an advisor that has the expertise and experience to find you the best deal possible.

Call today on 0808 189 2301 or enquire online to get matched with your ideal broker.