Your home may be repossessed if you do not keep up repayments on your mortgage.

As the owner of your own business, the last thing you want to be doing is trying to sort out your own mortgage. You have an accountant to make sure your accounts are correct. You should have a mortgage adviser to make sure your mortgage is correct.

If you have a good accountant, they will do what they need to do to keep your tax exposure down. Unfortunately, that might reduce the amount you can borrow on your mortgage.

How do the lenders assess the income of a limited company director?

There are several ways that lenders assess income for limited company directors.

The most common of these is to use your salary plus dividends. Usually, they will take an average of the last two years, but there are lenders such as Santander, Coventry Building Society and Skipton Building Society who can use the latest years figures.

To be able to evidence your salary and dividends, the lenders will ask for your last two years tax calculations (previously called SA302s) and corresponding tax year overviews. They’ll also ask for your last two years finalised and signed accounts.

Some lenders such as Santander, have their own accountants certificate which they send directly to your accountant to complete and return.

Another way for lenders to assess your income is by using your salary plus the retained profits. What this means is that if you haven’t taken out all of the profit from your business, but you still have access to it, then you can use that as part of your income. The lenders will usually want to see that you own at least 50% of the business and will use the same percentage share on the retained profits. For example, if your salary was £10,000 and the retained profits were £100,000 and you owned 60% of the business, you would be able to use the £10,000 salary plus the £60,000 of retained profits, to give an income of £70,000.

Again, to assess this income, the lenders will ask for your last two years tax calculations (previously called SA302s) and corresponding tax year overviews. They’ll also ask for your last two years finalised and signed accounts.

Similar but different to the above, another way that your income can be assessed is by using your salary and profit before tax or after tax.

The lenders will look at what percentage of the business is yours and apply this to either the profit before or after corporation tax, depending on their own internal criteria. Without sounding like a broker record, the lenders will need your last two years tax calculations (previously called SA302s) and corresponding tax year overviews. They’ll also ask for your last two years finalised and signed accounts.

The best thing to do is to speak to us as early as possible in the process so we can assess your documents and find out who will be the most generous depending on your situation. We can speak to your accountant directly and ask them to send us the correct documentation and if we need to we can tell them what would be useful for your next years figures.

I’ve not produced my accounts for this year. Will that be a problem?

As a rule of thumb, lenders can accept your documentation as long as they aren’t over 18 months old. This means that when your personal tax calculations are completed in April, they can be used until the October of the year after. If the accounts or tax calculations are over 18 months old, you will need to ask your accountant to produce the documents for the next year.

How much can I borrow?

We can go through a number of affordability calculators quickly when we have our first conversation and provide you with a very accurate figure. To help you out at this stage, most lenders will be able to lend you 4.5 times your annual income, with the most generous being able to lend you 5.5 times.

How much deposit do I need?

As a minimum, you will need to put down a 5% deposit, but ideally, you want to put down a minimum of 10%. Every time you put down a further 5% deposit, the interest rates will reduce until you have a deposit of 40%+.

How long can I have a mortgage for?

The longest mortgage terms are between 35 to 40 years, although we don’t really like recommending the longest term possible as the amount of interest you pay will be substantial.

You will also be limited to age 70 in most cases, although there are a number of lenders who will go past this if you are contributing to a pension.

Next Steps

We are happy to talk through all the options with you, find the right lender, and manage the process for you all the way through.

If you are thinking about buying while on a visa then do give us a call on 0117 332 5197. Our initial conversations usually last around 15 minutes.

Alternatively, you can email enquiry@lloydwellsmortgages.co.uk and let us know how we can help you.

We will discuss:

  • How much you can borrow
  • What that will cost
  • What fees can you expect
  • How Lloyd Wells Mortgages work
  • What insurances you will need
  • What documentation you will need to provide
  • Next steps

Your home may be repossessed if you do not keep up repayments on your mortgage.