Mortgage - Director in your own company

harvey115

Hi jm2926

Yes Salary = pay + dividends

I get the total salary to add upto 42000 annually to stay under the 20% tax threshold. The same applies to my brother who is 10% shareholder in the company as well.

Hopefully I can find someone to accept our application for the above amounts. I will update this thread on the findings.

I am tempted to call 'Mortgage Monitor', any other recommended brokers good for me?

opinions4u

I would certainly use a broker for this. How they position it with the lender will be crucial.

As a former underwriter for a big lender I'd have chucked it out of the door pretty quickly. Unfortunately for you, there a cleaner, simpler and lower risk (both for the lender and the professional reputation of the individual) cases for the underwriters to approve.

Not just for the lack of accounts, but also becasue your brother's income appears to be designed to get a mortgage and avoid 40% tax rather than being a reflection of his worth as an employee.

Yes Salary = pay + dividends

With both of you owning more than 5% of the business, I think net profit is going to be what interest the lender most.

harvey115

I have been looking into some brokers specialising in limited companies or contractors such as contractormoney

It seems like if I have largest share in the company then my company net profit can be considered my earnings. This sounds like a good news to me because my company's last year net profit after dividends is £150K+

So if that work's out okay I will get the mortgage on single applicant (on myself).

Does this look more reasonable for the lender now do u think?

I am tempted to walk into HABC today to check if they can give me an idea without doing any credit checks. Do you think it's a good idea? Am I rushing things?

harvey115

Hi

Just been to a few high street lenders but could not meet any mortgage specialist in the branch, I will be getting some phone calls in the week to get an idea.

HSBC- There was an account manager who mentioned in order to get an appointment with a mortgage advisor they have to do credit search, so I declined. He mentioned that even if you are self employed they will not take into account my company's profit.I think he was not the right person to advice on the mortgage.

Natwest - The account manager filled up a basic quotation form keeping two applicant on the system with 42K salary and ignoring self employment factor out. She forwarded my details to the mortgage advisor to give me a call on Monday. She mentioned they usually require 2 years accounts for limited company.

Nationwide - Again mortgage advisor was busy with another customer, so I got some basic advise. Self employment is again not very easy to put through, so they told me the specialist will call for further details and information.

Halifax - Not a real mortgage expert but she had some good knowledge on the subject. She mentioned that the bank has recently got a new system which requests for at least 3 years of accounts. She said if I would have come in December one year accounts were no issue and they would have been fine in giving me a mortgage deal. She mentioned that they will be considering the company's profit in the net income as well to decide the amount available in mortgage. However she said there is no guarantee at this point if the underwriters would except 1 year accounts, but she said they can try and put a good case through.

Metro Bank - the mortgage advisor will give me a call on Monday to discuss.

I will try to call the contractormoney and mortgage monitor people next week to check if I can get a good deal from them instead. Any suggestions as to which broker I should stick with or call. I want to avoid credit searched they will knock my credit score badly if both of these brokers started credit checking.

meer53

I don't assess for mortgage lending but i do assess for loans. We need 3 years net profits figures, if you dont have 3 years and are still in the same business as previously then we would ask to see your P60's from the previous years.

Dividends aren't taken into account in my assessments either, only net profit figures and any directors salaries. Not sure what other lenders would do about dividends ? It may be a problem for you.

harvey115

Yes you right Dividends could be an issue as well because they do not appear in P60's at all.

Although in terms of my previous P60, I have for the last 3 years, they are all fine (without dividends). Hopefully one year's accounts would be fairly okay, given that the company has a good amount of profit.

I terms of annual accounts, do the lender usually asks for evidence if the accounts are submitted to HMRC or not? My accounts have bee generated by the accountant but we have not submitted them yet as the due date is still away we want to carefully asses them before submitting. However the figures are not going to move a lot.

Simon_gloster

I was just about to post harvey.....and you have prompted me.

What income is on you SA302 for the most recent year? This would apply to all self emp applicants. What you declare as income for tax is what lenders will use.

I think you should prepare yourself for not getting a high steet lender. As you found out they will need 2 years accounts min. Dont try and fool yourself they will accept less.

Those nice 3% - 3.5% rates may not be what you get.

As O4U said, and I underwrote for a bank, I would have declined in within 2 minutes and hada quiet word with thw advisor for referring cases well outside policy. Sorry.

Thrugelmir

To withdraw the retained profit from the Company you will need to pay tax in same form.

So have you considered funding the mortgage through a pension scheme. By using the 25% tax free lump sum.

This would be an acceptable repayment method to a lender.

property.advert

I'd be having words with my accountant as the OP doesn't seem to be au fait with directors, personal allowances, tax mitigation, dividends, corporation tax, retained profits and accounts.

In many small companies, it is often most tax advantageous to declare an income of only £7000 or so, around the NI threshold and personal allowance. Further compensation is then through dividends, which avoids employee and employer NI, though corporation tax is due. As small company corporation tax and income tax rates are both currently at 20%, this makes it tax advantageous.

If you really need to present something to a lender, it would be prudent to get up to speed on the tax and accounting side, speak to brokers and potentially put in place a structure now which fits the lender's profile later on.

As for accounts having to be submitted, then yes, they will have to be else you could simply make something up simply for the lender and declare something completely different to HMRC !

casslass

Hi, I'd be interested to hear how you have go on with contractor money. I'm thinking of using them soon. My OH works as a contractor for a bank and changed to become self-employed because of this as he gets a daily rate. He will also only have 1 year of accounts and has a similar arrangement for maximising income through salary and dividends.

Good luck with your search.