Company Director Salary

K0210P · 16 October 2019 at 11:50AM

Hi all,

Looking for some recommendations or advice regarding our current mortgage application.

I am employed and my partner is a company director (paid through PAYE and dividends). We have used a broker (free service) who has taken over 9 weeks to finally tell us that the "Senior Underwriter" will lend us around £20k less than required due to the retained earnings left at the end of the latest accounts. They are taking solely this figure (after all salaries and dividends have been paid) and stating affordability issues. The difference in salary + dividends and this retained earning amount is £14k. After an explanation from the accountant the lender has advised they wont change their decision, which is fair enough.

My confusion is surely having paid out all outgoings and still being left with money at the end of the year would be a good sign? Our broker tells us that all lender underwriters will take this stance if profits had dropped from the previous year, so any lender that asks to see accounts will give us a similar answer and either decline us or offer less than required. We are only able to provide 2 years accounts. From the first year £5k from retained earnings was used towards 2nd year dividends (2 directors at the time - now only 1).

Has anyone had any experience of dealing with lenders who look at the overall salary and dividends/retained profit/net profit or any other brokers that have more specialist knowledge that would be recommended?

Thanks

csgohan4 · 16 October 2019 at 12:14PM

you need a better broker, a specialist one that you pay on mortgage offer only.

Was the free broker from an Estate agent as they are usually not good

I am self employed and I wouldn't dream of letting a free broker near by mortgage application originally

SonOf · 16 October 2019 at 1:06PM

I am employed and my partner is a company director (paid through PAYE and dividends). We have used a broker (free service) who has taken over 9 weeks to finally tell us that the "Senior Underwriter" will lend us around £20k less than required due to the retained earnings left at the end of the latest accounts.

Retained earnings and trend of these does impact on the affordability check. If the retained earnings increase over the three year period, then that is postive on the decision. If they decrease, then its a negative.

Experienced brokers will know the lenders that handle directors better than others. Was your broker one of the online-factory line services that cherry-picks the easy stuff and mans their service with new, inexperienced people or an estate agent or a local personal broker?
You would expect a localised independent mortgage broker to have no issues with director status providing the figures stack up and don't show a declining trend.

ACG · 16 October 2019 at 1:43PM

I always worry when a broker says "if one lender does this, they all will", that is very rarely the case and if it was, why did the broker get it wrong in the first place?

If he cant do it or doesnt want to do it - why not just say that?

We have an industry that has plenty of lenders (we have access to around 80 for example) and some have very flexible or unusual underwriting processes.

I cant answer your question in all honesty as I dont know the question, but I know of lenders who will work of PAYE & dividends and do not do a companies house check or ask for an accountants reference, so I would be surprised if this issue even cropped up.

Fee free brokers tend to be fee free for a reason, they are working on numbers. I used to be fee free, we now charge a fee, we do half the number of mortgages but we have more time for each case and we take on the more complex stuff - because we have the time to do so. I am not touting for business btw, we are not taking on any cases this week or next as we are booked up but sometimes you get what you pay for in life and this seems to be one of those cases where you are better off paying a fee and getting someone who will give it the time and energy it needs.

K0210P · 16 October 2019 at 1:59PM

Thanks to you both for replying.

Yeah the whole process initially happened quite quickly so we thought a recommended broker from this website and others would have been fine, but it appears that for more complex cases that they are unsure how to handle. I've spoken to two other lenders directly today who seem to on the face of it have no issue with the situation. Obviously aware that at underwriter stage ot can still change.

If there is any other brokers that have been used and good service was provided then please let us know. Happy to pay for the service provided.

[Deleted User] · 16 October 2019 at 2:00PM

There are a lot of different approaches that lenders take with self employed income.

This job is all about how you present a case to a lender. We don't like, we don't hide, but we present the case in its best light.

If you don't want a lender seeing accounts, go to one that used accountants certificate. If we want to use more than just salary and dividends (for instance we can use the retained profit as income even if it was never drawn from the company) then we go to a lender that will go in to that detail.

There are even lenders rhat will add allowable deductions back in to income figures to get the true earnings before accounting tricks.

There should be no reason for surprise underwriting decisions if you know what you are doing with a case.

It sound like thr broker should never have gone to this lender in the first place. And now you have a problem to try overcome

SonOf · 16 October 2019 at 3:13PM

we thought a recommended broker from this website and others would have been fine, but it appears that for more complex cases that they are unsure how to handle.

That explains it. This site has a policy of only recommending firms that can handle the business that results from getting mentioned. So, it will never recommend a localised independent broker. The ones recommended on this site are notorious for not being very good when it comes to potential snags or a case requiring a bit more work than the average.

If there is any other brokers that have been used and good service was provided then please let us know. Happy to pay for the service provided.

Try a local firm to you. You are basically looking for experience and that means not picking national firms that pick up new trainees at the start of their career.

K0210P · 16 October 2019 at 8:42PM

The experience so far has been such a headache, the broker just simply couldn't answer questions that we had and it was disheartening to hear them say other lenders would take the same stance.

We have been very transparent with accounts etc. Hopefully after a bit more research we can find a specialist broker or lender that can assist.

Thanks for the replies!

haras_nosirrah · 16 October 2019 at 9:04PM

I can think of a number of lenders off the top of my head that use salary and dividends only based on sa302's

I suspect the broker wants the case off their desk so they can move onto easier stuff.

Expect to pay around 3-500 but an experience broker will be able to place this without too much difficulty (obviously assuming that was the only issue - we would need to do a full fact find and see documents to say 100%)

I have had a number of clients contact me from here. All of them approached a free broker first, all of them had it go wrong and all of them have ended up with a mortgage offer. People think the brokers on this site are biased against the free conveyor belt brokers. We aren't, we just see the other side of the system that they are fine if things are easy but when cases are difficult or things go wrong we experienced brokers pick up the pieces - which is fine. It is what we are paid for.

K0210P · 18 October 2019 at 6:41PM

Well I'm pleased to say that after a meeting and application with Clydesdale today we have a mortgage offer subject to valuation! It was so quick, easy and stress free unlike the past 9 weeks! Learning point taken though from this experience.

alphabravocharli · 20 October 2019 at 11:47PM

Do you mind me asking how much % deposit you are paying and what is the interest rate they offered?

K0210P wrote: »

Well I'm pleased to say that after a meeting and application with Clydesdale today we have a mortgage offer subject to valuation! It was so quick, easy and stress free unlike the past 9 weeks! Learning point taken though from this experience.

Company Director Salary

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free