Dividends lower than profits - is this a problem for a mortgage? 30 April 2014 at 7:29PM in Mortgages & endowments 2 replies 471 views

Steady82

Currently trying to get an 85% LTV mortgage. I'm a 50% shareholder of a profitable 7 year old company but last financial year took more dividends than 50% of the profits by using reserves. Obviously this is fairly standard practice where large reserves have been established but my broker is suggesting this could cause a real problem for lenders as they'll all want to see evidence that the company can support my earnings going forward.

Can anyone suggest whether this is something that may stop me borrowing altogether or whether there are lenders who would not worry about this?

Thanks.

kingstreet

Use HMRC SA302s rather than accounts to evidence your income, then it doesn't become an issue for many lenders?

Thrugelmir

If dividends are being paid from retained reserves. Then obviously the question will arise as to whether this level of dividend is sustainable. Something which is nigh impossible to forecast. Unless the Company earns it's income from a guaranteed source , i.e. contracted.