Obtaining a mortgage as company Director - Argh!

mcevoyc

Hi All,

I am hoping someone can help me. I am currently trying to obtain a mortgage however with extreme difficulty. Let me first give you some background.

My father has owned a Ltd company and it has successfully been running for the past 17 years. He has now reached retirement age and in October last year myself and my brother bought the company from him (retirement funds!) and are now joint shareholders at 50/50. My brother however is a sleeping partner, takes no salary, and I am am the managing director who takes dividends and salary.

I basically take 2,500 a month in dividends and £12,000 a year salary which equates to a bring home sum of approx £3,300 (Approximately the equivalent of someone earning £55k normal salary)

Our financial year runs from August to July therefore I have just had the accounts finalised for this year (As of 31st July 2012) where I have been Director for 10 months (October last year to Now)

Obviously I also have accounts for previous years as the company has been running successfully for some time.

OK thats the background and here is the problem....

I can't even get past the first hurdle of being considered for a mortgage.

I have made an offer on a house which has been accepted. The value is £240,000, I have an £80,000 deposit so need a mortgage for £160,000.

They basically tell me that although the company has been running successfully for 17 years, I need to have accounts for the last 2 years with me as Company Director. Astonishing.....

I am basically looking for someone else in a similar situation or anyone who can offer any advise in terms of best place to go or people to speak to.

The net profits of the company are good and are best they have ever been in this years accounts after being director for 10 months.

It is not like I have set up a new company and their is immediate risk involved.

I rearly appreciate anyones help out there who could potentially advise and point me in the right direction

Thankyou in advance

ACG

Go and see a mortgage advisor. This looks possible to do, the only companies i know of (2) who would look at this are building societies not on the high street.

Thrugelmir

mcevoyc wrote: »

Obviously I also have accounts for previous years as the company has been running successfully for some time.

Your father ran the the Company and made it successful. After developing it over many years. From a lenders perspective there is no guarantee that you'll be as successful.

mcevoyc

Who are the Building Societies not on the high street who may consider?

ACG

Im not allowed to say, it could be classed as advice or leading you into making a decision.

If you go and see a broker they will be able to help. A Whole of Market or Independent will do the job.

mcevoyc

OK understood.

Is it best to go with local mortgage brokers, if you can find them (i.e. face to face) or is it just as productive to use nationwide i.e. internet based or over the phone?

Apologies if I sound like an amateur but when coming to mortgage brokers I think I am!

ACG

Its up to you, any whole of market or independent should know the lenders.

Personally for any large purchases i prefer to speak to people face to face, you know who your talking to - but thats just my preference.

Annisele

mcevoyc wrote: »

My father has owned a Ltd company and it has successfully been running for the past 17 years. He has now reached retirement age and in October last year myself and my brother bought the company from him (retirement funds!) and are now joint shareholders at 50/50. My brother however is a sleeping partner, takes no salary, and I am am the managing director who takes dividends and salary.

I basically take 2,500 a month in dividends and £12,000 a year salary which equates to a bring home sum of approx £3,300 (Approximately the equivalent of someone earning £55k normal salary)

That part sounds very odd to me. It's possible that I've got the wrong end of the stick, but if you and your brother are both 50% shareholders, and you both own the same class of shares, then how come you aren't taking equal amounts out of the business as dividends? Does the business owe your brother his share of the dividends? If it does owe your brother money, that might make a lender jittery if it doesn't think the business can support £2.5k per month dividends to each of you.

Thrugelmir

Annisele wrote: »

That part sounds very odd to me. It's possible that I've got the wrong end of the stick, but if you and your brother are both 50% shareholders, and you both own the same class of shares, then how come you aren't taking equal amounts out of the business as dividends?

Shareholders can waive their entitlement to dividends.

Annisele

Thrugelmir wrote: »

Shareholders can waive their entitlement to dividends.

Ah, OK, thanks. Would there not still be a risk to the lender that the other shareholder would decide not to waive his right to dividends in future?

Simon_gloster

Apart from the lack of employment status timescales here, the poster needs to think about what income they give a lender ie £55k sounds ok, however it is what is declared for income tax purposes that counts.

I read "my take home is £3300 pcm which leads me to the SA302's not showing £55k when done. Is it poss you could confirm this poster as the thing you dont want is to find a lender doing 12 mths trading to find the income you think you earn is not what they want.