Mortgage for Limited Company worker?

BatchedMetting

Hello,

Me and my spouse both work through our limited company. We get paid a salary and then dividends from the Limited Company. We are the only shareholders and directors and we split it 50/50.

I'm just wondering how the income is calculated when applying for a mortgage.

If the limited company generates £50,000 but after expenses like accountants, banking fees, computer equipment, and corporation tax, there's £35,000 left which is then split 50/50 between me and my partner/spouse, could we only get a joint mortgage on the £35,000 rather than the £50,000?

If we were regularly employed in a normal job, is the mortgage allowance calculated on pre or post-tax salary?

Also, if we were self-employed, rather than working through a limited company, would the mortgage allowance be calculated on the pre or post-tax income?

Also, I think as a self-employed person, you can't claim as many expenses, which would make the income bigger?

Does anyone have any experience of this? Many thanks.

YHM

An application for a Ltd Co Director would be based on either

a) Salary + Dividends
b) Salary + Net Profit

This changes from lender to lender, however, generally speaking, you can get a larger lend with lenders who use calculation B

ACG

It would always be based on income - peoples income varies from PAYE to net profit to dividends etc etc.

The £50k is turnover, you could be turning over £1m a year but if yoru expenses are £999,000 then you are not earning £1m, you are earning £1k.

amnblog

If you turnover £50,000, but your costs are £15,000 your profit is £35,000 and that is the maximum the lenders are interested in.

That is the case for both Limited Companies and Sole Traders.

The only difference is that if the costs of the Limited Company include PAYE paid to the business owners/mortgage applicants that can also be factored in.

BatchedMetting

YHM wrote: »

b) Salary + Net Profit

This changes from lender to lender, however, generally speaking, you can get a larger lend with lenders who use calculation B

Thanks! Is that Net Profit of the business (before corporation tax)?

amnblog

BatchedMetting wrote: »

Thanks! Is that Net Profit of the business (before corporation tax)?

That depends on the Lender. Some consider profit before tax, some after.

It's tricky, and the smart self employed applicant lets a broker manage any mortgage application.

BatchedMetting

Thanks. I would use a broker when the time comes, but I'm just trying to work out if its even worth thinking about mortgages for the future or if it's too much of a pipe dream.