Transfer of Title - Self Employed - NatWest

MWT

itiswhatitisnt88 said:

My only other option is to remove myself as a director of the limited company if that is even an option?

Don't do that, it is something lenders would look for and is trivially easy to check, as you are far from the first company owner to bump up against the realization that it isn't just salary that lenders look at when you have a significant ownership interest in the source of your income...

Talking to a mortgage broker is certainly a sensible step, and difficult as it is, you have to wait and see if there really is a problem or if the information you have provided will be sufficient, but warming up a broker to step in if needed makes sense.

itiswhatitisnt88 said:

… what sort of net profit are they looking for? I’ve been drawing the same salary for six and a half years so I hoped that would help but it seems to not make any difference…

Drawing the same salary over the last 6 years from a business that was closed for two years, was funded by an insurance payout followed by a loss then return to a very modest profit gives an impression of being somewhat fragile and has to have impacted on cash-flow and reserves considerably, so what you should be trying to show right now is that you can maintain growth with the cash you have in the business and maintain your salary at the same time.

Hopefully your accountant can provide an opinion on that as well, as without knowing a lot more about your business it isn't easy to know if you have the resources to grow organically with the cash-flow and reserves you now have...

One other point which I hope is not an issue...it would be a significant concern if you have had to put any money back into the business over the last few years, so hopefully you have not been using the salary you have received from the business to fund loans from yourself back into the business?  

itiswhatitisnt88

CSI_Yorkshire said:

You've been drawing the salary from a business that has been making a loss.  That does not give a bank confidence you can keep drawing that salary for the next 20 years to pay the mortgage.  That's what they are thinking about.

If the new paperwork is enough to give them the confidence, it will be fine.

Yeah I get that - I suppose it’s my baby and I love doing it, I never feel negative about it so this is a hard one for me but I completely understand that point of view.

I really hope so - I’ll update once I hear back and fingers crossed I’ve done enough to convince them! 

Thank you for your responses 

itiswhatitisnt88

MWT said:

itiswhatitisnt88 said:

My only other option is to remove myself as a director of the limited company if that is even an option?

Don't do that, it is something lenders would look for and is trivially easy to check, as you are far from the first company owner to bump up against the realization that it isn't just salary that lenders look at when you have a significant ownership interest in the source of your income...

Talking to a mortgage broker is certainly a sensible step, and difficult as it is, you have to wait and see if there really is a problem or if the information you have provided will be sufficient, but warming up a broker to step in if needed makes sense.

itiswhatitisnt88 said:

… what sort of net profit are they looking for? I’ve been drawing the same salary for six and a half years so I hoped that would help but it seems to not make any difference…

Drawing the same salary over the last 6 years from a business that was closed for two years, was funded by an insurance payout followed by a loss then return to a very modest profit gives an impression of being somewhat fragile and has to have impacted on cash-flow and reserves considerably, so what you should be trying to show right now is that you can maintain growth with the cash you have in the business and maintain your salary at the same time.

Hopefully your accountant can provide an opinion on that as well, as without knowing a lot more about your business it isn't easy to know if you have the resources to grow organically with the cash-flow and reserves you now have...

One other point which I hope is not an issue...it would be a significant concern if you have had to put any money back into the business over the last few years, so hopefully you have not been using the salary you have received from the business to fund loans from yourself back into the business?  

Ok I won’t take myself off as a director… I understand what you are saying!

Yeah I’ll speak to the broker, he’s great and used by a lot of people I know so maybe he can help.

I feel I have shown in the extra documents that I supplied that we can maintain growth and my salary but I suppose it’s subjective and I’ll have to hope they view it the same way.

Yes my accountant has been helpful and given me some help with supporting documentation.

No I haven’t put any funds in to the business personally and neither has my sister so that’s good.

Thanks for responding - I suppose it’s a complicated thing for them to assess and I’ll await their reply and I’ll report back ☺️

amnblog

This is quite complex but the key point is that NatWest will not generally not consider income from a Limited Company if you have made a loss in the most recent year.

If there is a clear explanation for the recent loss (a good example would be expenditure on a single item, like a new machine, a shop fit, a bad debt written off, or a vehicle). Something that is unlikely to be repeated.

It appears however that the business is coming off of the back of two loss making years and it only just in profit in the current year.

This will be a case where the underwriter will look at the detail of the Accounts to get a view if the business can be expected to continue to cover your PAYE and remain in profit.

Do not be surprised if they also ask for your Tax Calculations and Tax Year Overviews (even though your Accountant, like many, does not do self assessment returns for you as a basic rate taxpayer, they may need to do so to drive the paperwork the lender requests).

NatWest can ask for:

Full & Finalised accounts
Tax Calculation and corresponding tax year overview
Personal & Business Bank statements

Your Broker is the person to manage all this.

itiswhatitisnt88

amnblog said:

This is quite complex but the key point is that NatWest will not generally not consider income from a Limited Company if you have made a loss in the most recent year.

If there is a clear explanation for the recent loss (a good example would be expenditure on a single item, like a new machine, a shop fit, a bad debt written off, or a vehicle). Something that is unlikely to be repeated.

It appears however that the business is coming off of the back of two loss making years and it only just in profit in the current year.

This will be a case where the underwriter will look at the detail of the Accounts to get a view if the business can be expected to continue to cover your PAYE and remain in profit.

Do not be surprised if they also ask for your Tax Calculations and Tax Year Overviews (even though your Accountant, like many, does not do self assessment returns for you as a basic rate taxpayer, they may need to do so to drive the paperwork the lender requests).

NatWest can ask for:

Full & Finalised accounts
Tax Calculation and corresponding tax year overview
Personal & Business Bank statements

Your Broker is the person to manage all this.

Thanks for your reply, yeah I have sent the explanation for the loss and gone in to a lot of detail on the operational side of the business. 

I went direct to NatWest as they are my current lender but I’ve also reached out to a broker just in case. 

I did already have approval of the exemption from
natwest, that they would accept my p60s instead of tax calculations and overviews, I sent them with a letter from my accountant explaining why it’s done this way. 

I have submitted all this documentation and had a zoom meeting with the NatWest mortgage advisor where we went through all the documentation together so just waiting to hear back from the Under Writer if there’s anything else… fingers crossed I’ll hear back today and if nothing else not be trapped in limbo any more.