Advice for director of ltd company mortgages

Anxiousannie

Good evening

We are looking for some advice!
We are currently going through a mortgage application with Kent Reliance (I have a default for £100 from 3 n half years ago)!so have to use them
My husband and I have a Ltd company. Hes a director but im not
We are both PAYE through the company as we want to pay our taxes every month so we know where we stand and it's done. We both were taking low wage and getting topped up with dividends and some tax credits to build the company up. As f March last year we are now paying ourselves a proper wage and took some dividends too as we are both share holders.

Our current mortgage advisor spoke to Kent Reliance who said they would accept this but now application is in, underwriter isn't happy that we are PAYE and doesn't like the way we pay ourselves. Our accountant said it is fine to do this. Looking likely we will be refused.

Please could anyone give me some advice as I'm not sure where we stand now.

Thank you very much!

Annie x

sal_III

Usually you use company accounts, not personal income when applying for a mortgage as a director/shareholder of ltd.

I would hazard a guess that the underwriter is not happy with the tax inefficient way you are paying yourself since march last year, leaving you less net income, which might have not been reflected in their original affordability calculation. Didn't he supply more details what is it that he doesn't like?

kingstreet

A £300 default from that long ago is way too light for KRBS. I'd have expected to place that on the high street if there's nothing else.

We'd look at your accounts and your tax calculations and work out which lender would suit you best from there.

dunstonh

As f March last year we are now paying ourselves a proper wage and took some dividends too as we are both share holders.

directors of "own" company are not expected to have a "proper" wage as typically, you only draw to the primary threshold with the salary and then take dividends on anything above that. Taking a salary higher than the primary threshold is not tax efficient.

So, a salary of £702pm is the primary threshold. That would be the expectation. With dividends being the rest.

Our current mortgage advisor spoke to Kent Reliance who said they would accept this but now application is in, underwriter isn't happy that we are PAYE and doesn't like the way we pay ourselves. Our accountant said it is fine to do this. Looking likely we will be refused.

How does your differ from the norm?
Are you taking more than the primary threshold?

Rick_Albright

Hi there,

I think you need my plan:

https://forums.moneysavingexpert.com/showthread.php?p=74487668

kingstreet

Rick_Albright wrote: »

Hi there,

I think you need my plan:

https://forums.moneysavingexpert.com/showthread.php?p=74487668

No. They really, really don't!

Anxiousannie

Thank you for your replies!

Husband has been on phone to accountant and MA.
We are currently renting and the estate agents wanted payslips so that's why we upped our wages per month to show we had sufficient wages each month to cover our £1600 a month rent!

Anyway... MA said the underwriters wouldn't take my wages as apparently I hadn't been an employee long enough (I have for 5 years!)

He spoke to the underwriters today to discuss it more and they want to see last 3 years accounts and want to see a steady raise in profits... which there is. We are waiting for our latest accounts end of January so they can view the last year. They've written to our accountant for a ref too.

We are hoping now they will accept both our wages and dividends together. If not then we will try Kensington. I have 2 defaults one for £115 and one for £88! I used to be in a DMP and settled that 2 years ago. Which is why my credit isn't great.

Has anyone had any dealings with Kent Reliance?

dunstonh

We are currently renting and the estate agents wanted payslips so that's why we upped our wages per month to show we had sufficient wages each month to cover our £1600 a month rent!

I can see why the lender would consider that a negative against you. The estate agent has really not helped you at all. Plus, they have caused you to pay more tax than you should be. It was entirely unnecessary.

He spoke to the underwriters today to discuss it more and they want to see last 3 years accounts and want to see a steady raise in profits... which there is. We are waiting for our latest accounts end of January so they can view the last year. They've written to our accountant for a ref too.

It is not normally just the salary and dividends that the lender is interested in. Turnover, gross & net profit and retained profits. A number of lenders have a form that the accountant is asked to complete which gives that detail.

sal_III

Anxiousannie wrote: »

Thank you for your replies!

Husband has been on phone to accountant and MA.
We are currently renting and the estate agents wanted payslips so that's why we upped our wages per month to show we had sufficient wages each month to cover our £1600 a month rent!

Anyway... MA said the underwriters wouldn't take my wages as apparently I hadn't been an employee long enough (I have for 5 years!)

He spoke to the underwriters today to discuss it more and they want to see last 3 years accounts and want to see a steady raise in profits... which there is. We are waiting for our latest accounts end of January so they can view the last year. They've written to our accountant for a ref too.

We are hoping now they will accept both our wages and dividends together. If not then we will try Kensington. I have 2 defaults one for £115 and one for £88! I used to be in a DMP and settled that 2 years ago. Which is why my credit isn't great.

Has anyone had any dealings with Kent Reliance?

I think you are confusing your current Letting agent (the guys who deals with lettings/renting) with Estate agent (the guys who deal with property sales). They might be one and the same agency and people but the terms are distinct.

I have been renting for years and the fact that I only pay myself base salary has never been an issue. SA302 has always been enough proof of income. You followed a letting agent advice and made yourself pay more tax and NI than necessary. Next time ask your accountant for such advice, i'm pretty sure what he would have recommended.

Your OP only mentions 1 default, then you added a second default and a DMP, is there anything else you neglected to share?

Anxiousannie

Yes they are looking at it all I presume. The gross is good and accountant and MA seem to be confident with the figures. We are just baffled as the underwritor said they won't take my wages only my dividends but my husband's wages and dividends :mad:

Anxiousannie

Yes thanks for pointing that out... was a simple mistake made. I'm aware it's a letting agent i was cooking dinner whilst replying... apologies for the wrong term used!!!

Yes 2 defaults I only included the default in the first place to explain why we went with Kent Reliance I wasn't actually asking people for their advice on that part, hence why I didn't twelve more into it.

My letting agent wasn't happy with our previous years books and we had to pay a year up front hence why we had to put our wages up for the following year.