Mortgage based on Salary/Dividend

TMSL

The original adviser that you spoke to was completely wrong most lenders work from basic salary and dividends, some will take an average some will work off of latest year, it depends what you need as to which lender will suit.

CM66

I was in the same situation and got the best option with the bank that I use for the business account as they know your financial situation etc. Might be worth a try...........

spooky69

TMSL: That's interesting - thanks. Is there a level of ownership over which less lenders are not going to just consider salary and dividends?

CM66: Thanks for the tip. We use Barclays but I do not personally bank with them. I have a feeling that they would tend to add more weight to the Company accounts than my personal income but it might be worth a try.

TMSL

If you own over 25% of shares in the company you will normally be treated as self employed by the lenders. As such they will work on salary and dividends

spooky69

So over 25% (which I have) they should look at salary and dividends and not be concerned about Company profit?

Thrugelmir

spooky69 wrote: »

So over 25% (which I have) they should look at salary and dividends and not be concerned about Company profit?

Dividends are a distribution of after tax profit.

If you own a 50% shareholding in the Company. Then 50% is yours.(simplisticly put).

Meeper

OP, this isn't as simple a question as you think. Some lenders will want to see accounts, some will want to see SA302 tax returns for yor personal income, some will want to see both, some will take a reference from your accountant. There are many factors to take into account here, and as you "are not comfortable" putting your information on this public forum where mobody knows who you are (!!) then I'm afraid answers will always be on the vague side. If you don't want to be specific, you can't complain when people can't give you specific answers.

betmunch

Why not get a second opinion from a different broker, you never know, you might just walk into Meeper or TMSL's office!
I'm sure once a decent broker has done a full fact find with you they will be more than happy to process your application to a lender that fits with your situation.
I'm a bit concerned that the first broker you spoke with gave such duff info, i thought you had been talking to "man in the pub"
Was there any other reason that Nationwide was specifically brought up? And why are you unhappy with them? (presuming that you are not proceeding with them?)

Spangled

spooky 69 - I was in a similar position to you (although I earn from a mix of PAYE, self-employed earnings and company dividends). The company I run is with one other person and we are each 50% shareholders. We pay ourselves in dividends only, because the nature of our company work is sporadic. In most years I've drawn more in dividends than my business partner (because I've done more work through our company). ie my dividend drawings are usually substantially more than 50% of that year's total company dividend payouts. So in one year I may take £40k in dividends and my business partner just £10k (figures for illustrative purposes only).

With my application to HSBC for a mortgage I had to provide two key pieces of info:

1 Company accounts for the last three years
2 A letter from my personal tax accountant confirming income from all three of my income streams (PAYE, self-employed, company dividends) for the last three years.

HSBC seemed happy with that (I've been underwritten twice by them as we moved house in 2009 and ported the mortgage). HSBC took account of my actual received dividends rather than my company director share of dividends (50% on paper) - if they'd only taken into account the latter, I wouldn't have qualified for the mortgage on income multiple grounds.

I *think* that answers the question in your original post...

Good luck.

spooky69

Thrugelmir wrote: »

Dividends are a distribution of after tax profit.

If you own a 50% shareholding in the Company. Then 50% is yours.(simplisticly put).

Too simplistically put though. There are also different classes of shares that can be used for different purposes. I earn greater percentage of profit than is reflected by my shareholding. If this was not the case then I would not be bothered whether a lender looked at Company profit or income unless I was trying to claim on the basis of retained profit, which is not the case.

betmunch:
I didn't say I was unhappy with Nationwide - I am simply trying to find out what other options there might be as I was told that Nationwide were the only lender that would base a decision on only salary/dividends. There was no other reason that I was given for Nationwide being recommended. Company accounts would not be helpful as some retained profit was taken - tough year!

Spangled:
Thanks a lot - interesting information.

Meeper:
I didn't complain. I had presumed that some lenders would be more inclined than others to lend based on income taken. Equally there are surely some that simply will not lend based on income taken if someone owns a certain percentage of a business. This was how things were explained to me when I looked into this a few years ago. A VERY long time ago I sold financial products, including mortgages, and there were definitely some lenders that would place a higher emphasis on profit than income, which are not always the same thing.