Mortgage For Company Director

cottlad

Am in a pickle. I own a limited company and from there pay myself a minimum salary and also my wife although this is more for tax/NHI reasons. We also draw a small divi which usually takes our combined income to between 20k-40k/year although the company earns around £50k/year. That leaves it tricky for me to get a mortgage for what I want (around £190k.)
Is there a way around this without paying myself everything and upping my salary to the max for a couple of years? For example:

Can I (as an employee of said company) be paid let's say £4k/month for 3 months in order to have necessary 3 months payslips or are the rules different as I'm a director/owner of the company?
If that's the case, is it possible to transfer ownership of the company to someone else (my wife lets say) then pay myself £4k/month for 3 months and be eligible for a mortgage of £190k?

We have the income and funds for 15-20% deposit and can easily afford repayments but just need to get the damned loan.

Any ideas?

kingstreet

cottlad wrote: »

Am in a pickle. I own a limited company and from there pay myself a minimum salary and also my wife although this is more for tax/NHI reasons. We also draw a small divi which usually takes our combined income to between 20k-40k/year although the company earns around £50k/year. That leaves it tricky for me to get a mortgage for what I want (around £190k.)

So you manage your tax affairs sensibly.

Is there a way around this without paying myself everything and upping my salary to the max for a couple of years?

Not really, but some lenders do work from retained profits, rather than salary and dividends and this may work in your favour.

Can I (as an employee of said company) be paid let's say £4k/month for 3 months in order to have necessary 3 months payslips or are the rules different as I'm a director/owner of the company? If that's the case, is it possible to transfer ownership of the company to someone else (my wife lets say) then pay myself £4k/month for 3 months and be eligible for a mortgage of £190k?

No. No. No. You cannot do this.

We have the income and funds for 15-20% deposit and can easily afford repayments but just need to get the damned loan.Any ideas?

You are getting close to mortgage fraud, so be careful.

How many independent brokers have you spoken to? Not enough by the sound of things. If the firm earns the profits, there are lenders which will accept them.

ACG

I agree with kingstreet. If you speak to a broker, there is probably a way of doing this at normal rates and the right way without risking doing something untoward.

cottlad

I think because I pay my wife, the amount earned by myself as primary mortgage borrower is greatly reduced as we receive the same amount yearly. Lenders are willing to take into account joint incomes but won't multiply that by enough to give us 190k.

How long would I need to pay everything to myself do you think before lenders would take this as an income figure? The wife is looking for a job now the kids are both at school so the benefit of paying her a salary will soon disappear anyway (as long as she gets a job!!!!) lol

ACG

A lot of lenders would lend you the same figure if you earned £20k each or £40k and £0.

You are self employed, lenders go off your year end. So if your income up to April this year is more than last year, that will increase your average.

But I think the figures stack up enough based on what you have said, to get the amount you need by using a lender who works of PAYE + Net profit rather than dividends.

trailingspouse

We are in exactly the same position. We pay ourselves sufficient to use up our personal allowances, and the rest is in dividends. I'm assuming your wife actually works in the business and you actually pay her - your comment that 'this is more for tax/NI reasons' rang alarm bells with me.

Once we had two years' books, we had no great difficulty getting a mortgage - we ended up with Nationwide - but we did use a mortgage advisor.

Probably not what you want to hear, but if the lenders won't lend then you will need to reduce the amount you borrow (or, if money isn't tight, you could increase the size of your deposit).

cottlad

trailingspouse wrote: »

We are in exactly the same position. We pay ourselves sufficient to use up our personal allowances, and the rest is in dividends. I'm assuming your wife actually works in the business and you actually pay her - your comment that 'this is more for tax/NI reasons' rang alarm bells with me.

Once we had two years' books, we had no great difficulty getting a mortgage - we ended up with Nationwide - but we did use a mortgage advisor.

Probably not what you want to hear, but if the lenders won't lend then you will need to reduce the amount you borrow (or, if money isn't tight, you could increase the size of your deposit).

Could i be cheeky and ask what multiple of salary + NP the lender was prepared to offer? Or was yr loan amount well inside?

trailingspouse

Sorry - it was nearly 4 years ago. I don't remember!

ETA - we certainly didn't max it out. Running our own business, we wanted to be sure that we could cover the mortgage even if times were hard. The business is now 6 years old, we've been in the house nearly 4 years, and we're overpaying the mortgage by more than 100% with a view to having it paid off by the time OH is 65 in 7 years' time.