Sole trader or Ltd - Mortgage purposes

xKayx

This might sound like a stupid question but I have set up a business as an online retailer (no ebay or amazon transactions). I am hoping that by 2016 when my defaults drop off my credit report I will be able to apply for a mortgage.

However will two years in business be enough and which would be stronger accounts for a mortgage? Is being a sole trader enough or would limited financial statements be better to show?

This I should already know really being qualified in Accounting!

Aquamania

xKayx wrote: »

This might sound like a stupid question but I have set up a business as an online retailer (no ebay or amazon transactions). I am hoping that by 2016 when my defaults drop off my credit report I will be able to apply for a mortgage.

However will two years in business be enough and which would be stronger accounts for a mortgage? Is being a sole trader enough or would limited financial statements be better to show?

This I should already know really being qualified in Accounting!

I think mortgage lenders would normally like to see at least 3 years accounts from the self employed.

Assuming you are wanting a mortgage to buy your own home, then you will need to submit accounts as self employed; accounts relating to a limited company are an entirely different legal entity so it's not your money.

Pennywise

Aquamania wrote: »

accounts relating to a limited company are an entirely different legal entity so it's not your money.

If you're the shareholder and director, then the lender will either want to see the accounts or an accountants' certificate to confirm how much money the business makes. It's only if the company wasn't owned/managed by you that they'd not want to see them.

Can't imagine that a lender would be bothered one way or another whether it was a sole trader or limited company. The only issue is that far too many bank clerks and their online systems don't understand limited companies, so you may end up needing to use a mortgage broker if you go down the limited company route to by-pass the "computer says no" mentality.

xKayx

Thanks for your replies. I have gone ahead and set up as a limited company and decided that I will draw a regular wage from the company to show for mortgage purposes aswell as dividends when I can.

trailingspouse

We got a mortgage just a year ago, showing 2 years books from our limited company. We'd expected problems, especially as we'd been living abroad before we came back to the UK and set up the company, but things went surprisingly smoothly. The majority of our remuneration is in the form of dividends, and this was never raised as an issue by our mortgage adviser.

It might be worth talking to a mortgage adviser to get an idea of what the market is looking for at the moment, as it is subject to change without notice! When we first came back to the UK we were told no-one would look at us unless we could show 3 years books, but by the time we had 2 years, they were happy to accept 2 years!!