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working out income for mortgage app

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hello

hopefully in a year or so my partner and myself will be applying for a mortgage. By then we will have a 50 - 60 % deposit of the sort of house we want to buy.

I have been self employed for a year, although ended that in favour of starting a Ltd company this year. By partner and I both draw minimal salaries from the Ltd company with the rest in dividends.

Will the bank use our (small) salaries to calculate the amount we can borrow, or will they include dividends? I know most banks require 3+ years of accounts for self employed people - as we're technically employees of the company we own, does that still apply to us?

We do plan on going to a broker once we're ready to buy, just curious about these issues in advance.

Ta.

Comments

  • herbiesjp
    herbiesjp Posts: 8,499 Forumite
    Yes - you will be classed as self employed.

    They will look at salaries and dividends as you are a Limited Company.

    Lenders want a track record/proof of income in your current employment status - the more proof/longer track record you have the more options you will have available.

    Having only 1 year will limit you greatly.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • Thank you.

    London and Country told me we needed three years of accounts to stand a chance - would 1 year of sole trader accounts and 2 years of company accounts suffice?

    I realise these are very specific questions and that all lenders will have their own criteria, but I'm just looking at the bigger picture and time-scales so we can get a plan together.
  • Edited to add: my work as a sole trader and my work with the Ltd company are exactly the same thing - we changed the legal structure because it made more sense, tax wise, to do it that way. I also have long term contracts with clients that could prove future income for another 2 years.
  • Leeds building society will lend on 2years accounts
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