Company accounts required for mortgage - help!

geomic

My wife & I have submitted a mortgage application following an agreement in principle where we provided, among other things, our income details.

My wife is fine as she's employed and has submitted payslips, but I'm employed by my own company. So I gave them my average salary plus dividends that I've taken over the last 3 years which is high enough to borrow but they also want to see my company accounts.

This is where there's a potential problem: the accounts confirm how much I've taken out of the company but it also shows the company's income falling quite drastically over the 3 years (to less than the amount I've been taking out).

The only positive is that in the 10months since my last accounts the company's income has increased back up to a reasonable level - but they wouldn't know this as they only want last 3 years complete accounts.

Do you think they'll reject outright or ask more info? Or maybe (here's hoping) not put too much emphasis on it and let it through?

Background: Company's been going 6-7 years, I'm taking the mortgage out with my bank, and they are my company's bank too. It's a low LTV of around 40% and our credit is fine. No other loans bar a BTL which they said they'd ignore as rent covers mortgage.

Any guidance would really be much appreciated!

dunstonh

but I'm employed by my own company.

Do you mean you are self employed or a director of a limited company?

but they also want to see my company accounts.

If you are the majority shareholder then that is no surprise.

Do you think they'll reject outright or ask more info? Or maybe (here's hoping) not put too much emphasis on it and let it through?

You are possibly putting too much emphasis on it. It really depends on how much you are pushing the income multiples.

geomic

Thanks - to clarify: I'm a director of a limited company (which employs just myself) and I'm the only shareholder.
We're borrowing 3.9 times joint income but the agreement in principle said they could lend us up to 4.4.

I thought that the reason they wanted to see the accounts was to see the state of the company - which according to the figures isn't too good...

DVardysShadow

Can you borrow what you what on the last full year at 4.4 times?

opinions4u

geomic wrote: »

Thanks - to clarify: I'm a director of a limited company (which employs just myself) and I'm the only shareholder.
We're borrowing 3.9 times joint income but the agreement in principle said they could lend us up to 4.4.

So you're self employed as far as the lender is concerned.

I'd want to know what the net profit figure is (adding back in your "salary" and dividends) and trended across 3 years. I'd be very reluctant to lend against a declining net profit figure, especially when the owner is paying himself more than the company is making.

I thought that the reason they wanted to see the accounts was to see the state of the company

Makes sense doesn't it?

which according to the figures isn't too good...

I would ask your accountant to provide a projection for the current trading year.

How much is the property worth and how much are you looking to borrow?

From the small amount of information provided, this doesn't look like a case lenders will be falling over themselves to take on.

geomic

My latest year is pretty much back to what I would withdraw during the year. We're basically borrowing £300k and putting down £450k, the lender has told us we can borrow up to around £345k.

I could ask the lender to look at my business account for evidence of an upturn in business.
But should I be proactive about this or wait for them to query it? If I'm proactve it may set alarm bells ringing but if I don't they could just reject it out of hand...

geomic

I've found the criteria for Nationwide on self-employed mortgages (which includes ltd company directors) and this states they don't look at accounts for loans of less then £500k, they'll just accept a letter from an accountant confirming salary over the last 3 years.

I'm not sure how recent this criteria is and I believe it only applies to intermediaries. Can any mortgage brokers confirm this?