Mortgage broker help - ! Ltd Company / Dividend payments

jossberry

We need help in trying to find a good mortgage broker (Ideally one who deals with the full market) who understands small ltd company setups.

From our family ltd company, my husband and I are paid small salaries and we draw the rest of the money out as dividend payments. The problem we are finding is that most mortgage brokers treat our income the same as an employee who has a gross salary, when in fact we pay corporation tax and dividends are received NET. Our company has been running for over 5 years and has always been in profit!

We are based in SE England near Reading and any recommendations for brokers who understand our setup would be greatly appreciated.

nickbrown

Hi,

We are in a similar position and wondered if you had had any luck with sourcing a mortgage. Any help gratefully received.

Best
Nick

Thrugelmir

jossberry wrote: »

From our family ltd company, my husband and I are paid small salaries and we draw the rest of the money out as dividend payments.

Something the HMRC may take exception to if they decide your basic salary is insufficent to support your lifestyle.

What issue do have with the way that your dividends are treated precisely?

betmunch

I cant see the problem here, most lenders take salary and dividends as income, some will even include retained profit in the business.

Are you finding that they wont lend you enough on your salary and divi's or that they will not take one or the other into account?

COOLTRIKERCHICK

as you are 'employed' by your company, if you are having problems with them not including your dividends as part of your pay,

why dont you jusy give yourselves a payrise for a limited time, and lower your dividends?

ok you will have to pay more tax, as you have increased your wages...

might be worth talking to your accountant about this situation.

herbiesjp

Should be straightforward as long as there is proof of the income, and it is sufficient to support the mortgage amount needed.

luckyfool

Thrugelmir wrote: »

Something the HMRC may take exception to if they decide your basic salary is insufficent to support your lifestyle.

What issue do have with the way that your dividends are treated precisely?

Thrugelmir - Never had an Inland Revenue audit (though have had some interesting chats with my accountant about ones he has had with other clients), but I think you might be barking up the wrong tree here. Its none of the Revenues business how you pay yourself through a limited company as long as you are not evading tax. Both salary and dividends are subject to income tax. You can pay yourself a £100k salary and no dividends, no salary and £100k dividends, or £6k salary and £94k dividends. Doing either of the 1st two or any combination is perfectly allowable (if not tax efficient), while the 3rd is probably the most tax efficient way to distribute the income both in terms of reducing Income Tax, NI, and also building up entitlement to the state pension.

Where the Revenue would take an interest would be if you had the lifestyle of someone earning £100k but only had income (salary and dividends) to justify a much more frugal lifestyle.

Conrad

Ask a broker to try some of the smaller Building Societies as they are the best bet for this case often.

I don't know any brokers in Reading though.

Make sure they are mortgage brokers and not IFA's that do the odd mortgage.

waveneygnome

Jossberry - I was in similar position to you earlier this year. Sml Ltd co etc etc.......I managed to get my mortgage through First Direct, they looked at the profit of the company, rather than my dividend drawings (I always try and leave more money in the business than I take out........seems to have kept me going the past 20yrs!)

I know First Direct can be picky with the LTV - mine was under 50%, which no doubt was a factor.

Good luck.

jossberry

Thanks for all the replies! We did find a broker, in the end we went with my husband's business partner's broker who has loads of contacts and although we are only at the survey stage we passed the credit checks etc. with flying colours, (apparently the first self employed people to do so in around 7 months!) so that's positive. We did initially speak to some very large well known broker firms, most didn't have a clue how self employed, limited companies work. We were astounded by their ignorance, some even suggested we were avoiding tax, considering we use 2 chartered accountants the suggestion was ridiculous. Getting a good broker who understands the set up of a small business is definitely the answer and of course one who communicates always helps!
In response to cooltrikerchick, we did have to up our salaries a bit and we reduced the dividend accordingly, we do have a good LTV_65%. The broker also said how important it is to your credit history to have lived in your address for at least 5 years because it shows you can pay a mortgage.

COOLTRIKERCHICK

fingers crossed for you jossberry