Getting a new larger mortgage - business owner

7chb

My Wife and I are looking to move to a larger house.  Before we start the process, we're hoping to get some possible clarification over how our earnings may be assessed to give us an idea as to what our affordability will be deemed as.

We both own our limited company, I run the business whilst my Wife works part-time in another job.

It is set-up so that I pay myself a minimal salary from the business, and then the last 2 tax years I've paid myself a dividend taking me up to the higher rate tax threshold limit.

My Wife earns her part-time salary and then also receives a smaller dividend from the business.

Because we don't want to pay income tax at the higher rate we have obviously therefore left money in the business.

So what I'm wanting to clarify is whether lenders would just use our salary/dividend information, or if they are likely to consider the net profit/funds held within our business also? Thank you in advance.

ACG

Most lenders will work off PAYE & Dividends. 
There are a couple of lenders at normal rates who will do PAYE & Net profit. 

I do something fairly similar to yourselves, albeit only in my name rather than mine and my partners. 

DullGreyGuy

7chb said:

My Wife and I are looking to move to a larger house.  Before we start the process, we're hoping to get some possible clarification over how our earnings may be assessed to give us an idea as to what our affordability will be deemed as.

We both own our limited company, I run the business whilst my Wife works part-time in another job.

It is set-up so that I pay myself a minimal salary from the business, and then the last 2 tax years I've paid myself a dividend taking me up to the higher rate tax threshold limit.

My Wife earns her part-time salary and then also receives a smaller dividend from the business.

Because we don't want to pay income tax at the higher rate we have obviously therefore left money in the business.

So what I'm wanting to clarify is whether lenders would just use our salary/dividend information, or if they are likely to consider the net profit/funds held within our business also? Thank you in advance.

For us it was based on what we actually paid ourselves, they asked some basic questions about the company itself but retained profits were not part of the affordability calculations. 

If you happen to be a contractor our mortgage broker at the time said there were some lenders that would base affordability on the day rate rather than drawings but their interest rates were worse at the time and as we've over a decade of trading (at the time) a traditional approach was fine for us.