Ltd Company Director/Employee and Mortage Applications Question

IrishGypsy

Morning all,

There's a very distinct possibility that I will be pursuing the development of my Ltd company from a P/T to a F/T basis in the upcoming weeks.

In the context of mortgage applications, my current understanding is that even though I'm the sole director of the company, because I'm technically also an employee, I can self-generate, accurate, off-the-shelf payslips to be used in future mortgage applications (a couple of years down the line).

Is this correct or would I need to show profit and loss records for X years like a sole trader would?

Many thanks in advance.

betmunch

Yes you will be treated as self employed.

You will be able to use salary, dividends, and in some cases retained profit to work out your maximum loan

IrishGypsy

Hmm, that's a bit of a bummer. Has the economic downturn made it much harder for those S/E buyers? (Assuming their turnover/profits/salary/divies etc are all reasonable)?

Wh05apk

IrishGypsy wrote: »

Hmm, that's a bit of a bummer. Has the economic downturn made it much harder for those S/E buyers? (Assuming their turnover/profits/salary/divies etc are all reasonable)?

It has, lenders will only base lending on historic proof of income, i.e. accounts/sa 302's you can't just get your john bull printing set out and produce your own payslips - those days are gone!

IrishGypsy

Thanks for the replies, really appreciate it. So if we take the scenario of 3 years trading accounts, year 1 is part-time values, years 2 and 3 show massive increase for Full-time trading, do a lot of mortgage lenders average out the 3 years or look at the current 'trending' in income?

betmunch

You will have a range of options from the average over 3 years, to some that will use only the most recent years.

I would suggest going to see a broker and discussing the situation in full BEFORE making a decision on when to change to a Limited company.

Wh05apk

Lenders generally need a minimum of 2 years, if your LTV is less than 75% you may get away with 1 year.

IrishGypsy

betmunch wrote: »

You will have a range of options from the average over 3 years, to some that will use only the most recent years.

I would suggest going to see a broker and discussing the situation in full BEFORE making a decision on when to change to a Limited company.

The problem here is that we won't be looking for a mortgage for at least another 2 years due to my wife's job (and our requirement to move each year, so we're renting just now).

My current role is due to finish soon, so unless I get a FT job within the next 6 weeks, I need to make the decision to pursue the company I've working on for the last 3 years (1 as Sole Trader and 2 as a Ltd company). And no doubt the mortgage landscape will have changed then compared to what it is now

I'll look into having a conversation with a broker to at least gain a better understanding in advance.

Appreciate all the help :beer:

betmunch

Sorry, I didnt realise that you had already become a LTD company. In that case you dont need to worry about when to change!

You have 2 years to make the company as profitable as posible then!

Good Luck