Struggling to find mortgage as company director

Someone24972

My status:

- Company director of company I founded ~7 years ago, 40% shareholder
- £600k in company reserves
- Pay myself £100k salary
- Have always paid myself about the same
- Company is debt free
- First time buyer, excellent credit rating
- Buying with partner, combined income ~£135k
- Have ~£90k cash to put 10% deposit down on property ~£600k

Phoned Which up, and they asked for last 3 years of numbers, roughly they were:

Net profit after tax
2016: £140k
2017: £27k loss
2018: £92k loss

The losses are unusual for us, we have sold our first product for 6 years as one of purchase item, and have now transitioned to our new product which is recurring payments for customers. There was always going to be a period of loss, and also a period where potential cash flow issues would exist from transitioning to a new payment model for customers. We've also recruited in a push to grow. It's all been measured, cautious and well planned.

The losses were anticipated, accounted for, and the total losses for these two years are smaller than we anticipated (we planned for total losses ~£250k for this period). In summary, the transition was a tremendous success.

We are now slowly moving back into profitability. Last quarter was profitable, and we're expecting this quarter about to end to be profitable.

Unfortunately, Which have told me that they can't find anyone to lend to me at this stage because "The feedback I am getting, as I have gone back and asked further questions, is they would have concerns about the sustainability of the income over the life of the mortgage as you can only live off capital reserves for a certain amount of time before it will impact the business."

Is there anything I can do? I'm worried I won't be able to get a mortgage, or end up having to pay a bigger premium with a specialist.

ACG

Find a proper broker, not a call centre full of employees who want easy cases.

You probably will not have the pick of lenders but there should be options out there. I placed a case twice last year where the company had a £300k loss with a projection of a £2.5m loss the following year - all budgeted and accounted for. One of those lenders no longer lends money but it just shows a loss is not a deal breaker.

Someone24972

Thanks for reply, new to mortgages but was under the impression Which were decent?

What should I look for when looking for a proper broker?

dunstonh

Thanks for reply, new to mortgages but was under the impression Which were decent?

These internet/phone based call centre mortgage brokers are fine on simple stuff. They are not good on complicated or more time-consuming cases. They run like a factory line. The staff are timed and under pressure to move on from one case to the next. Plus, staff knowledge is not likely to be as good as most local experienced mortgage brokers.

Use a local whole of market broker.

What should I look for when looking for a proper broker?

If they refer to themselves as whole of market than make sure they are whole of market in all areas. Many brokers are based in IFA firms. However, there are also dedicated mortgage only brokers. Avoid estate agent brokers (unless its a small independent. The big estate agent chains use sales reps).

ACG

Most mortgage brokers start off in estate agents or call centre based companies. Once they are experienced they tend to set up on their own or work for a smaller business. So you probably want a small firm - local/not local does not matter too much but just someone with experience really.

Someone24972

Phoned up a smaller broker today who is more specialist... it's not looking good at all. He told me because the losses are going the wrong way it'll put a lot of lenders off. Options open up at 20% deposit which is completely unaffordable to me.

This year end I was planning on withdrawing a big bonus from our reserves to help fund the deposit - so even if we're profitable this year before that drawing it will make us unprofitable for 3 years running. Serves us right for being risk averse and building up the cash reserves I guess, should of just taken more earlier.

Quite upsetting news so far, I've been viewing places and I'm paid an excellent salary and have been working hard to build this business for most of my working life.

I guess I'll keep phoning brokers up for more information and see if any can help.

haras_nosirrah

looking at criteria there are a couple of lenders who may do this subject to the fine detail
It is one where I would want to call the underwriters upfront to really go through the situation before placing the case.

Someone24972

Would brokers who do full market searches be aware of those lenders? Is there any value in phoning up lots of brokers?

dunstonh

Someone24972 wrote: »

Would brokers who do full market searches be aware of those lenders? Is there any value in phoning up lots of brokers?

When I used the term "local" before, I was meaning it more as an indicator to size of firm rather than location. Small firms tend to have greater knowledge as the owners/directors and attached advisers tend to stay with the firms longer and the experience is therefore better.

So, you would expect them to have knowledge in most cases.

Quite upsetting news so far, I've been viewing places and I'm paid an excellent salary and have been working hard to build this business for most of my working life.

That is actually quite unusual as directors normally have a low salary (to the primary threshold) and then dividends on the rest. Lenders often ask the turnover, profit, retained profits, salary and dividends. Trends can influence if you are pushing limits.

ACG

£510k is probably a bit on the top side, but I would not expect you to be a million miles out. Maybe £475k-ish.

With Horas' comment I am just wondering if I am missing something.

Thrugelmir

Someone24972 wrote: »

- Company director of company I founded ~7 years ago, 40% shareholder

Who owns the other 60%?