Obtaining a mortgage as company Director - Argh!

ACG

Good point Simon.

They will bse it on your gross annual income (and probably also an affordability check). Its not based on what your income is the equivelant of. This will only really matter if your looking at getting the most possible from your income.

Which on an income of £42k trying to borrow £160k probably isnt too far off. If you have no other debts etc though it should still be possible and your putting down a decent sized deposit.

Thrugelmir

Annisele wrote: »

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?

The alternative view is that the Company doesn't have sufficient reserves (or make enough profit) to pay the dividend to all shareholders.

Dividends are primarily used for tax efficiency in owner controlled businesses as a means to pay remuneration. So other aspects to consider from a lenders point of view.

Fortune82

I'm in a very similar position to you, albeit I only started my company up 3 years ago. No income based mainstream lender would take any interest in offering me just 30% LTV as I didn't 'fit the template'. However when I met Handelsbanken and explained my situation the reception was very different - if you have a branch nearby I suggest you make an appointment. All decisions are made locally rather than by a computer or panel, you will also pay a premium to best buy rates - but hey, you've got to spend that NI saving on something!

Dave_Ham

Sorry, initially missed this thread when away on hols.

I hope the OP has seen a decent broker by now as this case should be achievable given the information supplied.

All the best

redrum1982

I'm in a similar position i.e. company director, shareholder (25%), get paid in monthly dividends and minimal PAYE.

When it comes to applying for mortgages with high street lenders, does anyone know how they actually calculate the figure to use in their "multiples of salary" equation?

Taking the "mcevoyc" example with a monthly income of £3,300. Using a salary calculator (e.g thesalarycalculator.co.uk/lifestyle.php) would work out at about £56,000. With a multiple of 4, a lender would lend £224k.

However I saw a financial advisor the other day who simply took the total dividends for the year, in this example, 30,000 and re-added the 10% which you get tax credit for. This would make this £33,333. Add on the PAYE and you're up to £45k or so. With a multiple of 4, you'd only get £180k. Quite a big difference.

If they use the latter method, that seems crazy to me because you're effectively being penalised by the lender for utilising a perfectly legitimate payment method over someone who gets paid in a more standard way i.e. all through PAYE.

Does anyone have any knowledge on this?

harvey115

Gross annual Dividends (re-addning the tax credit) + Gross annual PAYE salary would be what gets used by everyone.

You will definitely need a mortgage broker as you come under the self-employed brackets.

Simon_gloster

It is legitimate the method in which income is calculated, but as per this thread anda couple of little lenders, the main lenders will only use SA302 forms from hmrc as they will only use income declared to the tax office for affordability purposes.

redrum1982

So basically people who get paid via DIV+PAYE will always be offered less by a lender than people who take home the same amount but get paid solely via PAYE.

Even though the amount of money which is actually paid into their accounts is the same?

Simon_gloster

If the DIV has been declared then usually the PAYE and DIV gets added together. Its all down to how it can be provem showing that hmrc has had their correct share.

If DIVS arent declared to hmrc, how can the amounts credited be the same to a PAYE person paying either 20 or 40% or more.

redrum1982

Simon, apologies. I don't understand what you're saying?

My point is that two people could have exactly the same take-home monthly figure. Person 1 is paid via DIV+PAYE. Person 2 is just PAYE.

Based on the figures, person 1 will be offered less by a lender than person 2. Even though their take-home monthly figure is the same.