Trying to get a mortgage offer with a new LTD company / previous sole trader

ltdmortgage

Hi everyone

I am in an awkward position when it comes to lending for a mortgage due to a newly opened LTD company - Am I stuck waiting 1-2 more years for a higher mortgage offer?

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I was sole trader in 2019 and ended it in April 2022 (end of tax year).

In Sept 2021 I formed a LTD company for tax efficiency reasons. My job role, customers and everything is exactly the same. No employees, only me as director.

Since the start of this tax year everything has been through my LTD company.

I have spoken with L&C and Habito and they said lenders can only offer based off my previous 2 tax years completed (20-21, 21-22) and nothing that my LTD has earned (for example profits sat in company bank account).

Each year my business has increased profits, especially this past year but that is not taken into account for the mortgage offer as my LTD does not have 1 years accounts.

My first year LTD accounts can be filed 30th September which isn't too long to wait - I can even file early if needed.

I was told that to take into consideration my company profits for a mortgage, I need 2 years LTD accounts or is 1 year enough with some lenders?

Is this just how things are or will I get more options with a different broker?

Appreciate any input!

ACG

You might be able to do something now, but options will be slim.
You will definitely be able to overcome this issue with one years accounts with the new company.

The problem is that on paper you want a mortgage using the income from a business which no longer exists. Using common sense it can be overcome but you wont have the pick of lenders. Speak to a proper broker (ie not a call centre). Someone who only gets paid if you get a mortgage rather than someone who clocks off at 5pm. 

ltdmortgage

ACG said:

You might be able to do something now, but options will be slim.
You will definitely be able to overcome this issue with one years accounts with the new company.

The problem is that on paper you want a mortgage using the income from a business which no longer exists. Using common sense it can be overcome but you wont have the pick of lenders. Speak to a proper broker (ie not a call centre). Someone who only gets paid if you get a mortgage rather than someone who clocks off at 5pm. 

Thank you for your reply!

I will definitely be looking for an independent broker.

One thing I have noticed just now after checking my billing software, due to the time it took to swap over customers to my LTD billing system; my company tax year being Sept-Sept is out of whack from my 100% LTD income months of April-April (I ceased sole trader in April 2022).

So at a glance, my LTD (sept-sept) brings in more than my sole trader previous year but in reality on a month-to-month basis (or april-april), it brings in even lot more.

As I bill my customers monthly, hopefully lenders/brokers will see this and choose the actual income level and not the sept-sept one if that makes sense..

ACG

What most lenders will do is use your income on your SA302. 
So for previous years that would income from self employment. 
As a ltd company director that would be PAYE & Dividends. Some lenders will work off PAYE & share of net profit but you are reducing your options which when combined with everything else is probably not really what you want to be doing. 

Its also not what the company brings in, its the income after deductions. Turnover is vanity, profit is sanity as they say. 

K_S

@ltdmortgage It's not going to be easy but you may have options off the high street with lenders who are willing to look at the substance. If you have an accountant, it'll help a lot.

What kind of business is it? If you are a contractor providing services through your ltd.co, there may be other ways to place the case.

In any case, your best bet is to speak to a good experienced whole of market broker that is good with self-employed clients. There's nothing wrong with using the volume brokers like L&C for straightforward cases but for your case you need someone who has the knowledge to know whom to speak to and the time to do so. Ask your friends, family, colleagues for any brokers they would recommend. Good luck!

ltdmortgage

ACG said:

As a ltd company director that would be PAYE & Dividends. Some lenders will work off PAYE & share of net profit but you are reducing your options which when combined with everything else is probably not really what you want to be doing.

What do you mean by not what I want to be doing, are you referring to a higher % mortgage rate?

K_S said:

@ltdmortgage It's not going to be easy but you may have options off the high street with lenders who are willing to look at the substance. If you have an accountant, it'll help a lot.

What kind of business is it? If you are a contractor providing services through your ltd.co, there may be other ways to place the case.

In any case, your best bet is to speak to a good experienced whole of market broker that is good with self-employed clients. There's nothing wrong with using the volume brokers like L&C for straightforward cases but for your case you need someone who has the knowledge to know whom to speak to and the time to do so. Ask your friends, family, colleagues for any brokers they would recommend. Good luck!

Yeah I have an accountant. I provide IT services direct to customers (not a contractor) and bill them monthly recurring fixed price so very predictable income.

I don't know anyone that has used a broker but i'll check out this forum and unbiased website and others, thanks!

ACG

It would reduce your options massively. 
I can only think of 2 lenders who will do 1 years PAYE and share of net profit. One is a bit mean with affordability at the best of times and the other is more expensive. 

ltdmortgage

ACG said:

It would reduce your options massively. 
I can only think of 2 lenders who will do 1 years PAYE and share of net profit. One is a bit mean with affordability at the best of times and the other is more expensive. 

Okay I understand thank you.

simon_or

OP, be careful about using Habito

https://forums.moneysavingexpert.com/discussion/6375374/habito-mortgage-brokers-in-trouble

The only advice I'll give is don't get too fixated on rate. Get a solid broker and get a mortgage that you're happy to live with. When it's time to remortgage it'll be much easier as you'll have multiple years of trading under your belt.

ltdmortgage

simon_or said:

OP, be careful about using Habito

https://forums.moneysavingexpert.com/discussion/6375374/habito-mortgage-brokers-in-trouble

The only advice I'll give is don't get too fixated on rate. Get a solid broker and get a mortgage that you're happy to live with. When it's time to remortgage it'll be much easier as you'll have multiple years of trading under your belt.

Wow that's surprising to hear they are in trouble! Thanks for the link.

I'm going to try and get as big of a mortgage as possible since my cost of living is very low, no kids etc.