Mortgage - Self Employed or Company Director

blackbeltben

Hi all,

Hoping someone can help me. I am currently self employed, turning over a fair amount of money, still just under the VAT Threshold, but if things keep going as they are that won't be the case for long.

It makes financial sense to register as a Ltd company. However in 12-18 months time myself and my girlfriend are planning to buy a property, and I wondered what the implications would be when applying.

I have three years books at the moment, so four years by the time we'll be applying for a Mortgage, which is fine. However if I register as a Ltd company this year, will this mean potential lenders will only be able to take into account the books from when I registered the company, OR can they take the last three years of me being self-employed as well?

Any and all input appreciated .

Derboy

I'm a Ltd company director but by no means an expert on mortgages and in sure one of the mortgage brokers in the Mortgages section will be better placed to help you.

Its my understanding that you'd effectively be creating a new entity in the Ltd company and then you as a sole trader enter into a contract with said company to transfer the assets to the new business and become a shareholder (which is all just a paperwork exercise).

That suggests that rather than it be viewed as a continuous business from an accounting point of view. Its viewed as the end of one business and the start of a new one. So it depends on how the mortgage lender looks it at. You really need to get a broker involved so they can pinpoint sympathetic lenders.

If it were me, I'd wait till after I had moved before switched to Ltd. After all you can register for VAT whilst operating as a sole trader.

lawriejones1

Interesting question. Even if you we're a Ltd company they'd still consider your take home pay, not the turnover/profit of the business. I agree with the above Gough, secure the mortgage on your current situation, I wouldn't change it at the moment as it could be considered a risk.

You have to realise that generally, while brokers will understand the situation those on the mortgage side will certainly need a helping hand.

Hoploz

lawriejones1 wrote: »

Interesting question. Even if you we're a Ltd company they'd still consider your take home pay, not the turnover/profit of the business. I agree with the above Gough, secure the mortgage on your current situation, I wouldn't change it at the moment as it could be considered a risk.
.

Yes stay as you are, do not change your status or you will lose your trading history.

Just to add, I have a mortgage which took the company's figures rather than take home pay. Different lenders will do things differently, (so get yourself a good mortgage advisor, perhpas a recommendation from someone in similarnposition to your self) but as my husband is sole director and I am 50% shareholder the profit can't go anywhere else, or rather, if we got into arrears, we would have access to the total amount anyway. However, we have 20 years trading history and a large amount of working capital in the bank so that would presumably have been taken on board as well.

fashionvictim

My OH did this- about 1 year of LTD company before new mortgage application. If was no prob. Well no more prob than getting a mortgage being self employed previously. It is still just him in his company.

My only comment you can't get a mortgage on undeclared earnings. My OH does not have the type of role where you get cash in hand, and course all being honest here no one would not declare. But that and lots of expenses going through your company will affect lending.

I have had opportunities where I was pushed to go Self employed too but we found easier to have an employed person as second person on application.