Mortgage as a Director of a Ltd company - Proving income

myk3

Hi there,

over the past 5 years or so i have been saving for a deposit for my first property with my other half. we have manage to scrape together £50k and are ready to start looking. our budget is around £200k so we have a 25% deposit.

18 months ago i started my own business and broke away from my current PAYE salary. The business is a Ltd company of which i own 100% shares. i take a ~£500 salary each month and take the rest as dividend each quarter from the profits the company has made after tax.

The business has slowly been growing each month so is doing well at the moment. Combined with my partners salary (currently in a 6 month contract which is likely to renew) we make a conservative 50k per annum.

Due to the fact i cannot properly prove my income and that my partner is employed on a contract basis i feel that this will make it hard to be accepted for a mortgage regardless of the 25% deposit we have. also please note we have no debt and both our credit ratings is excellent.

My dad said he will be our guarantor so maybe this will even out the issue above?

can anyone advise how our current situation will affect us being accepted and if having a guarantor will enable us to be accepted regardless of our employment situation.

thanks,

mike

holly_hobby

As a controlling director of a ltd co - you are classed as self employed and will need a min of 2 yrs certified (i.e signed off) accounts. Your income will be assessed on drawn salary and dividends.

Your partner is on a 6 mth contract - has this been renewed ? Are they in a specalist field ? Is it normal for the field within which they work for individuals to be employed on a contractual basis ?

Not all lenders accept guarantors - the usual proviso for doing so is that there must be a proven time frame within which the guarantor will be released.

Your guarantor also has to meet all income/status checks as part of the assesment - and should receive full legal advice on the obligation that they are entering into (should they be accepted - I have known some lenders ask for proof that such legal guidance has been sought).

You have a 75% LTV & a suggested great credit record - which is a good start in getting someone to have a look at this.

The best chance (in the short term) is to wait until you have 2 yrs certified books & your partners contract has been renewed - this won't open up the whole market to you but there will be lenders who will consider 2 yrs accounts and will feel more comfortable with a rewnewed contract (in respect of your partner).

Don't under estimate the value of using a whole of market broker to assist (esp as your partner is non-std employment i.e conract), they will be able to discuss the case with various lender contacts to see who will be the most flexible to your requiremetrns, there are also your own bankers, who already having a relationship with you, may be more flexible to your situation.

Hope this helps

Holly

myk3

Thanks for this. the main issue i have is that the first year was a very slow year so may not be sufficient for the bank to allow me the mortgage we desire.

My partner works as a nurse for the NHS. she is 3 months onto her 6 month contract. They will speak to her within a month or 2 I would imagine to discuss what is to happen with regards to this contract.

i guess speaking with a broker may help as they will be able to speak with their reps at each bank and save me the leg work...
thanks for your reply.

GMS

There are lenders who would consider with 1 years accounts. Speak to a broker to see if there is a way forward.

holly_hobby

I do loathe to be negative, but from my experience I doubt you will get anywhere with just 12 mths certified accts of a slow yr & an NHS agency nurse (in their first 6 mth contract).

IMHO you would be better waiting for a least 2 yrs certified accounts, with hopefully your 2nd year being a bumper one to give you the borrowing power, and your ptnr having some repeat NHS contracts under their belt.

Your broker will certainly have the work cut out for them - but I wish you well in your travels !

Hope this helps

Holly

myk3

yes i do understand and your answer is what i thought would be the case.

thanks for your input!

holly_hobby

GMS wrote: »

There are lenders who would consider with 1 years accounts. Speak to a broker to see if there is a way forward.

OP has stated his first year was poor

Holly

GMS

holly_hobby wrote: »

OP has stated his first year was poor

Holly

Where? Business is growing and conservative estimate of 50k p.a joint income of which we do not know the split between the 2 earners.

Agreed there could be difficulties and no option but without full details we could not say for sure.

myk3

yea the first year made 10k profit. i was however only trading for 4 - 5 month or so and only had a few customers. this year we are picking up business faster and things are lookging good touch wood!

on the bright side we can keep adding to the deposit...