Limited company director trying to get a mortgage please help!

vlevans

Hi all just wondering if you had any advice for me.

My husband is currently a 50% share holder managing director of a company that he took over in Jan this year (when his dad retired) the company has been up and running successfully for nearly 20 years but we are finding it incredibly difficult to get a mortgage because all the lenders we have approached want at least 2 years accounts for my husband (which we obviously do not have)
We have been told by Santander that it would not be a problem got AIP and paid set up fees and have now been told this week that they now cannot do the mortgage for us! :eek:

We have sold our house as we thought we had our mortgage in place, we have 10-15% deposit and the purchase price is 204k, my husband earns 55k per year in PAYE and dividends.
If anyone has any advice or solutions I would love to hear them because we are at a loss where to go from here!
Thanks

holly_hobby

Although a Ltd Co - with a 50% stake your hubby is classed as a major sharedholder and controlling director - and for mortgage purposes as self employed.

Any lender will want to see the books on this -and with 20 yrs trading there are books to present - so not sure why you believe there isn't 2 yrs to present.

The lender will be looking at various things in relation to the books and the Co's trading history, obviously also concentrating on the salaries drawn, dividends paid as income and how much is left in the company pot after this (presuming he is not a contractor of some sort when the approach is a little different) - i.e is every penny coming into the Co, going straight back out as directors salaries.

In place of books, have you offered to present your hubbys proof of income & tax paid to HMRC over the reqd period ?

Or if you have an excellent credit score, and track record, you may sneek through on a fast track mortgage (talking Halifax now ) whereby as long as your credit score comes in as an A or B - they don't always elect (but reserve the option) of proof of income i.e books in your case. (not sure if that facility is still available and isn't advertised to the general public).

I'm not currently involved in placing mges, and presume that all the old traditional self certs have bitten the dust - did you place your own mge or do you have a broker working for you ?

If not, it may be time to engage the svcs of one, he/she should be able to tell you who has the best criteria for self employed, and know the easiest way (if there is one) to get it through.

As a thought, have you tried your existing lender - they have a history of you and may be able to assist ... got to be worth a try.

One of the active mge brokers should be along, and will be able to give you a bit more guidance on current lenders criteria for ltd co controlling directors.

Hope this helps

Holly

vlevans

hi, thanks for the reply the lenders want 2 years accounts of earnings for my husband which we do not have as he only took over in Jan this year. My husband has forwarded both a letter from his accountant confirming my husbands wages now and his fathers previous which he has simply taken over, as well as the net profits for the company and an accountants certificate.

We have been told self certs are no longer done, so we're stuck!

holly_hobby

So in effect your hubby has only been self employed for 6 months - and his annual salary is therefore not yet proven.

Did your Husband work for the company before he became a controlling Director ? i.e has a history with them, knows the business and its runnings etc..

Why won't the lender accept the Accountants letter & projection (did they ask for one), did they give a reason why they rejected the letter ? (although I suspect is the 6 mths causing the problem)

Have you approached your existing lender?

Holly

vlevans

my husband has worked for the company for 11 years (since leaving school) and has been running it while his dad owned it for the past 2-3 years.
The lender asked for the details from the accountant said the were fine and I think now it's gone to the under writers it's become a problem, all we've been told is that they need 2 years accounts for my husband.

We are currently trying to get hold of our current lender's mortgage advisor at our local branch to see if they can help us.

kingstreet

I don't know why lenders have such a problem.

Treating someone as self-employed when they aren't is a daft thing to do, IMHO.

If you start a business, either self-employed or limited company, after six months neither will have a sufficiently good trading record. However, if you take over or buy an existing business, whether self-employed or limited company, you should be able to offer the business' trading accounts as evidence of its profitability.

As a Director of a limited company, you are an employee and subject to tax through the PAYE system and taxed under schedule E. If you are a significant equity holder, you may also be entitled to dividends, on which (IIRC) the company pays advance corporation tax at the point of payment to you.

I would suggest it is completely reasonable for a lender to ask for three years salary figures to ensure there's no inflation of salary in the short term just to justify the mortgage and to obtain evidence of dividend payments from HMRC, before deciding how much of the dividend to take into account.

So, three years accounts, three years P60s and dividend payment history from HMRC should be more than enough to back up a mortgage application. It may be worth trying one or two of the smaller building societies who may be able to adopt a more flexible approach. In this case, the low deposit isn't helping.

jjlandlord

kingstreet wrote: »

As a Director of a limited company, you are an employee and subject to tax through the PAYE system and taxed under schedule E. If you are a significant equity holder, you may also be entitled to dividends, on which (IIRC) the company pays advance corporation tax at the point of payment to you.

You are an employee only if you decide to be.

If you are, the tax efficient way to go is to pay yourself a relatively low salary with the rest of your income coming from dividends.

In any case if the company is essentially you alone, whatever the structure you are in effect self-employed.


Perhaps one way to do it, though perhaps more expensive tax-wise, would be to draw all income from employed salary and just mentioned to the lender that you are "employed".

vlevans

kingstreet wrote: »

So, three years accounts, three years P60s and dividend payment history from HMRC should be more than enough to back up a mortgage application. .

We have this for my husbands father but not for my husband as it has only been since Jan that he has been managing director. Would this still be acceptable?

Senior_Paper_Monitor

I would expect it to be possible to negotiate this successfully with one of the smaller (more logical - not 'computer says ...' lenders).

Find a broker willing to put some heavy research and negotiation in - don't bother trawling it round the main high street players.

kingstreet

jjlandlord wrote: »

You are an employee only if you decide to be.

If you are, the tax efficient way to go is to pay yourself a relatively low salary with the rest of your income coming from dividends.

In any case if the company is essentially you alone, whatever the structure you are in effect self-employed.


Perhaps one way to do it, though perhaps more expensive tax-wise, would be to draw all income from employed salary and just mentioned to the lender that you are "employed".

Fair comment.

vlevans

Senior_Paper_Monitor wrote: »

I would expect it to be possible to negotiate this successfully with one of the smaller (more logical - not 'computer says ...' lenders).

Find a broker willing to put some heavy research and negotiation in - don't bother trawling it round the main high street players.

we've had a broker dealing with it for us from the begining, the mistake I think we've made though is going with the estate agents mortgage advisor which on reflection we should not have done.