Mortgage question for self employed

ejsteel

Hi,

My wife and I are both directors of our limited company and we are looking to move house in 2-3 years time. We currently each pay ourselves a small salary and then a dividend each month (we both take the same amounts into our joint bank account). Just wanted to check what is the best way to make us most attractive to lenders? Do lenders look at the overall amount that is taken between us each month or do they just look at one of us? Or do they look at the overall profit that the business makes (i.e not the amount we take but the overall profit?).

Also does anyone have an idea who are the best lenders in our case? I have heard Santander offer good self employed mortgages.

Any help would be greatly appreciated.

Thanks

Let_Us_See

Come back and ask in 2-3 years time when you are ready to proceed as any existing lender's criteria could have changed.

ACG

Lenders will typically look at your wage plus dividends for affordability purposes. They will also want to look at how the company is performing.

Santander offer the same mortgages to employed people as they do self employed, as do all lenders. Im assuming you have spoken to someone self employed who has said their mortgage is with Santander?
Its all about what is available to you and what is available at the time of application. In 2 years anything could have happened.

Best to look at the rates and the lenders criteria when the time comes or to consult a broker to do the leg work for you.

HappyMJ

ejsteel wrote: »

Hi,

My wife and I are both directors of our limited company and we are looking to move house in 2-3 years time. We currently each pay ourselves a small salary and then a dividend each month (we both take the same amounts into our joint bank account). Just wanted to check what is the best way to make us most attractive to lenders? Do lenders look at the overall amount that is taken between us each month or do they just look at one of us? Or do they look at the overall profit that the business makes (i.e not the amount we take but the overall profit?).

Also does anyone have an idea who are the best lenders in our case? I have heard Santander offer good self employed mortgages.

Any help would be greatly appreciated.

Thanks

Technically you aren't self employed so you can apply for any mortgage. You are employed by the company that you own as employees. The company is a different entity to you. The most attractive to mortgage lenders is your PAYE salary but as you know this isn't the most tax efficient way of your company paying it's profits to you.

Let_Us_See

HappyMJ are we reading the same OP? They state they are directors, and if they own more than approx 15% of shareholding then most lenders will classify as self-employed and will have to apply as self-employed - despite how they arrange their renumeration.

Most lenders don't differentiate between employed and self-employed mortgage schemes.

ejsteel

Thanks for all the advice. We will certainly get a mortgage broker to help out when the time comes. In the mean time is there anything we should be doing now to make us look more attractive to lenders (other than trying to make as much money as possible!).

For example I know when I applied for a mortgage when I was a PAYE lenders would lend on a multiplier of one salary and then a smaller amount of a second (e.g 4 x my salary + 1 x my wifes salary). We both pay ourselves the same at the moment, would it be better if one of us took more from the business and the other less or do lenders just tend to look at the overall picture of how much profit the company is making?

HappyMJ

ejsteel wrote: »

Thanks for all the advice. We will certainly get a mortgage broker to help out when the time comes. In the mean time is there anything we should be doing now to make us look more attractive to lenders (other than trying to make as much money as possible!).

For example I know when I applied for a mortgage when I was a PAYE lenders would lend on a multiplier of one salary and then a smaller amount of a second (e.g 4 x my salary + 1 x my wifes salary). We both pay ourselves the same at the moment, would it be better if one of us took more from the business and the other less or do lenders just tend to look at the overall picture of how much profit the company is making?

They should do an affordability calculation and lend based on your disposable income based on your day to day living expenses.

ACG

Its all done on affordability, so it doesnt matter. Just do what is best for yourselves it doesnt really matter on the split.

ejsteel

Thanks for all the help everyone, very helpful

ahujeffy

Interesting post, I am in a similar situation Ejsteel. I guess lenders will judge on a case by case basis, but I just had a discussion with one of the big firms of mortgage advisors who suggested it was significant that with a growing business I am now splitting the dividends with my wife and that this would probably adversely affect how much could be lent as she only has one year of dividend income history, while I have three. I was left with the over-riding impression that there is a limit to how call centre staff can help - I am sure face-to-face with a good IFA is the way forward on this one.

Let_Us_See

Shouldn't be too big a problem as her income source has a three year history of NP/dividends but are now split between potential joint applicants rather than single applicant.