Self employed or Company Director Mortgage

vanilla_twist

Hi I was wondering of the people who frequent this board might be able to give me some advice for my son.

He and his brother started up a business last june. They are company directors and first years accounts will be done soon. Until February this year my youngest so was still also working full time in the job he had since he left school until he was made redundant.
In this job he was paid around £30k a year. He now gets £600 a week and company pay his tax and NI. He made £100k on a 2 year building project on top of this which is after he paid capital gains.

He now wants to get a mortgage and has a comfortable 60 % deposit. He has spoken to one broker who has said no chance until he has 3 years accounts.

My point is surely he is employed by the company so has a continuous employment record. If so where is the best place to go for a mortgage? He has an appointment booked next week with his own bank. He is good at saving so his account is healthy. Apart from his new business starting last year he was developing a house with his dad and has saved to pay all the cash injections he has needed.
The only credit he has is his car which he is happy to pay off to secure a mortgage as they plan to lease company vehicles by the end of the summer anyway.

The property he wants to buy is £160k and he will need to spend around £20k to get it perfect. He would rather put 50% down but can go higher and do it up out of his wages.

I have been looking at mortgages and a £80k mortgage over 25 years is less than his car payments. He plans to pay overpayments equal to the repayment every month as well.

Any help I would be very grateful. He has a guarantor if needed.

TIA

V x

amnblog

The broker your son spoke to does not know what they are talking about.


That said, it is not as easy as you outline above.


If the business is profitable their may be some options for your son if he speaks to a mortgage broker who regularly does self employed cases.

kingstreet

Depending on the rest of the application, it is possible to get a mortgage with one year's accounts.

There are a handful of lenders who will do this.

Who works for what firm? This;-

He and his brother started up a business last june. They are company directors and first years accounts will be done soon. Until February this year my youngest so was still also working full time in the job he had since he left school until he was made redundant.

In this job he was paid around £30k a year. He now gets £600 a week and company pay his tax and NI. He made £100k on a 2 year building project on top of this which is after he paid capital gains

isn't very clear.

vanilla_twist

The business is profitable. Obviously they will not be dulling down the profit on first years accounts because of son wanting a mortgage.

The profit will be 8 months part time business and 4 months full time but should show around £80k profit after wages. He can't use this profit to draw on to buy the house due to business expansion.

I think his own bank is his best bet first as they have his banking record and if he needs a guarantor it is an easy thing to do.

His step mother is happy to get a mortgage in her name but there would be strings attached which are not in his favour. Plus I see no reason he can't find a mortgage even with a guarantor as for him it is not a huge amount.

This house is not as an investment this time it is going to be his home for quite a while.

V x

vanilla_twist

kingstreet wrote: »

Depending on the rest of the application, it is possible to get a mortgage with one year's accounts.

There are a handful of lenders who will do this.

Who works for what firm? This;-


isn't very clear.

My youngest son worked for a firm until February this year but also worked 6 hours a day on the new company he owns with his brother.

They both worked 6 hours a day in the new business after their other jobs from june 15 until feb 16 ( ie 6-8am then 4-8pm) when youngest son was made redundant. Then they both started working solely for the new business.

They are now paid £600 a week and their company pays tax and ni.

On top of this the companys first year profit is around £80k. They are not drawing this as a dividend but using to grow the business.

hth

V x

ACG

It will all come down to his shareholding.
If he has around 25% plus then he is self employed and so will need at least 1 years accounts. If he has less than that then you may find he can get away with being employed but I suspect his payslips will not stack up to what he wants?

(Just as a side note, its not a case of dropping the shareholding and then increasing it again). One for a broker but potentially can be done a lot sooner than 3 years.

amnblog

vanilla_twist wrote: »

I think his own bank is his best bet first as they have his banking record and if he needs a guarantor it is an easy thing to do.

His own Bank is almost certainly not his 'best bet'.


This is a case for a Broker.

frazell

I am a limited company director and I managed to get a mortgage with 1 years accounts in 2011 which was incredibly difficult to do considering the market at the time.


After canvasing my bank at the time (Santander) with whom I'd banked for 15years (Abbey & A&L) and being effectively laughed at, I engaged a broker to handle it.


There was only one lender available to us and our broker had to work VERY hard to achieve this, we provided endless information to support the application, including money available in ISA's, savings, assets, 2 years of personal bank statements, accounts, SA302's, all business account statements....(inside leg measurements), the lot.


I can honestly say that we would have NEVER achieved this without his specialist input and his direct line into the underwriter on almost a daily basis.


The point to all this, as mentioned above, do not assume that your current bank will be able to assist or care, you are a number to them and they will just apply their criteria and that's it.


In the case such as this, with the help of a specialist broker you can achieve far more than you will ever on your own.

looknohands

He's a director, he owns 20% of the business so he's not been in regular continuous employment, it's not the same. My girlfriend is a 12% owner of a business but employed by them and was assessed as a regular employee.

I have heard some interesting things from my lender re companies (Virgin Money)
I own 100% of a company I have just set up, so was keen to find out more and called them.

They will only assess on two years accounts and the business needs to be profitable, they combine business profit before tax and the directors salary. Dividends don't count with virgin but dividends come out after profit has been calculated, so I'm pretty sure it doesn't matter.

I waited until I had 2 years good accounts before applying for a mortgage when I was a sole-trader, now I've got a mortgage I've switched around to a limited company and am expecting to wait another two years until I can apply to borrow more money.

So Virgin as a lender will look at the companies profits as well as the directors actual salary. I'm pretty sure most other lenders only look at actual income received by director, salaries, dividends etc...

vanilla_twist

ACG wrote: »

It will all come down to his shareholding.
If he has around 25% plus then he is self employed and so will need at least 1 years accounts. If he has less than that then you may find he can get away with being employed but I suspect his payslips will not stack up to what he wants?

(Just as a side note, its not a case of dropping the shareholding and then increasing it again). One for a broker but potentially can be done a lot sooner than 3 years.

One years accounts will be available very soon.
Its just a shame that he didn't apply for a mortgage before he was made redundant as would have been easy enough to obtain the amount he needs.

Has anyone a view on his getting a mortgage with a guarantor?

V x