Remortgage, now paid dividends...

slc123

Hi,

I am leaving the term of a 2 year fixed mortgage and need to change it from part interest only and extend the term to 30 years. This will also involve removing one person from the mortgage. Because of this I have to prove my earnings again.

The issue I have is 2 months ago I moved from standard PAYE to a very low salary on PAYE and a high dividends payment. This however is a non-equity shareholder position so I don't own any % of the company itself. My current mortgage company said they would not take any dividends into account. Is this going to be the case anywhere and what can I do?

Any advice welcome...

Thanks in advance.

Simon_gloster

Do you have an accountant?

Most lenders will accepet dividends amd treat you as self employed....thus rendering it useless on terms of your trading period.

Your PAYE is the only income you could use at the moment, therefore the transfer of equity is unlikely to proceed on your own at present.

For future reference, your future mortgage apps will be based on the dividend income you declare to HMRC not what you actually get.

Are you salaried and receive dividends as part of your remuneration package?

Who's the lender?

Thrugelmir

You own none of the Company's shares but receive a dividend?

Could you clarify how you are remunerated.

Wh05apk

I've come across this before, basically just a tax "fiddle" I can't remember who I used, I think it was nationwide, they needed copies of the company accounts, purely to confirm the dividend was sustainable, and confirmation from accountant that you were non equity owning.

Definitely a case for an experienced broker.

Simon_gloster

In a nutshell yes.

Classic real example now from last month:
Person PAYE £1000 pcm. £9000 dividend every month. 0% shareholding in the company.
You would think £10000 pcm * 12 = £120000 income as this is the income they declared on the mortgage. Declared for tax purposes £42000 !!!!! Declined on affordability.

Wh05apk

Simon_gloster wrote: »

In a nutshell yes.

Classic real example now from last month:
Person PAYE £1000 pcm. £9000 dividend every month. 0% shareholding in the company.
You would think £10000 pcm * 12 = £120000 income as this is the income they declared on the mortgage. Declared for tax purposes £42000 !!!!! Declined on affordability.

So the £120k income was fraudulent? otherwise it would have been declared to HMRC?

Looks like you were sucked in by this client, is that why you do not have the correct (or any signature?)

maninthestreet

Is this another case of someone wanting to have two separate incomes? A lower one for 'tax' purposes, and a much higher one for mortage purposes??

kingstreet

How does a company pay dividends to someone who isn't a shareholder in the company?

Genuine question - I'm interested in how this works!

Wh05apk

kingstreet wrote: »

How does a company pay dividends to someone who isn't a shareholder in the company?

Genuine question - I'm interested in how this works!

I think it's down to different type of shares, possibly non-voting? not sure, it didn't make sense to me when I first came accross it, fortunately these cases are not common!

Simon_gloster

Wh05apk wrote: »

So the £120k income was fraudulent? otherwise it would have been declared to HMRC?

Looks like you were sucked in by this client, is that why you do not have the correct (or any signature?)

I'm not a broker or a mortgage Advisor

harvey115

I own a company as well, can I get some more details of this scheme

I thin banks would easily see the difference unless provided with proof from HMRC showing the correct numbers. Otherwise the lender would simply use the amount registered with HMRC and ignore the rest. Since no shareholding in the company, profit of the company may not be available for the lender to consider during affordability check.