Mortgage for the Director of a Limited Company

Getting a mortgage as a limited company director can feel overwhelming. Your income might come from a mix of salary, dividends, and retained profits, making it trickier for some lenders to assess your affordability. But the good news? With the right preparation and guidance, securing a mortgage for the director of a limited company is achievable.

By working with a broker experienced in self-employed mortgages, you increase your chances of success and make the whole process smoother from start to finish.

If you are looking for a mortgage as a limited company director, contact Infinite Finance London at 020 3813 7800 for a free consultation today.

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What Is a Company Director Mortgage?

A Company Director Mortgage is a type of loan tailored for individuals who run their own business, especially those who are directors of a limited company.

Most lenders class company directors as self-employed, which means your application will be assessed differently from someone in a salaried job.

This includes your shareholding, how long the business has been trading, and how stable your income is through salary, dividends, or retained profits. The more solid your business and income history, the stronger your application will be.

Can a Director of a Limited Company Get a Mortgage?

Yes, as a limited company director, you can absolutely get a mortgage. While your income may be structured differently compared to someone in full-time employment, many lenders offer mortgages tailored for company directors. Instead of just looking at your basic salary, lenders may also consider your dividends and, in some cases, retained profits.

Many lenders are open to working with company directors, as long as you can show:

• At least 1 to 2 years of trading history
• Proof of sustainable income (salary, dividends, or company profits)
• A good credit score
• Supporting financial documents like company accounts and SA302s

Working with a specialist mortgage broker can help you find lenders who are familiar with complex income types and self-employed mortgage applications.

How Is a Company Director's Mortgage Calculated?

If you're a company director applying for a mortgage, you might wonder how lenders work out how much you can borrow. The answer depends on several key factors, including your income, credit score, deposit size, and each lender's specific rules.

Lenders assess several factors when calculating your borrowing capacity:

1. Income Structure

Your income as a company director can include:

• Salary
• Dividends
• Director's loan repayments
• Company's retained profits (in some cases)

While some lenders only consider your salary and dividends, specialist lenders may include retained profits in their calculations, allowing you to borrow more.

2. Affordability and Credit History

Lenders use affordability checks, assessing your income vs. outgoings. A strong credit history also helps secure better rates and increases the amount you may be offered.

3. Debt-to-Income Ratio

Your debt-to-income ratio is an important metric. Lenders will evaluate all your monthly commitments, including credit cards, loans, and the proposed mortgage repayment.

Many high street lenders have strict criteria and can be hesitant to approve mortgages for self-employed applicants, including company directors. This means your mortgage application might face more scrutiny compared to someone on a regular salary.

Tips for Company Directors to Prepare for a Mortgage Application

1. Keep Accurate and Up-to-Date Accounts

Lenders usually want to see at least 12 months of company accounts or personal tax returns. Make sure your accounts are accurate and professionally prepared.

2. Show Consistent Income

Try to demonstrate steady or growing profits over the last couple of years. Irregular income can make lenders cautious.

3. Improve Your Credit Score

Pay off any outstanding debts, avoid missed payments, and check your credit report for errors well before applying.

4. Limit New Credit Applications

Too many credit checks or loan applications before your mortgage can hurt your score and reduce lender confidence.

5. Work with a Mortgage Broker

A broker experienced with company director mortgages can guide you to lenders most likely to accept your application and help find competitive rates.

6. Be Ready to Explain Your Income

Sometimes lenders will want more details about your business and how you take income (salary, dividends, bonuses). Having clear documentation helps.

By preparing your finances carefully and understanding what lenders look for, you can improve your chances of getting the best mortgage deal as a company director.

How Much Deposit Do You Need?

For company directors, the typical deposit required for a residential mortgage range between 10% and 25% of the property's value. This can vary based on lender policies, the mortgage type, and your financial situation.

Because deposit requirements can differ widely, it's a good idea to compare different lenders. A specialist mortgage broker can help you find lenders with more flexible terms and guide you through the application process.

How Much Mortgage Can I Get as a Company Director?

As a company director, you can typically borrow 3.5 to 5 times your annual income, with some lenders offering up to 6 times for higher earners.

But it's not just about your salary. Here's what lenders usually consider when working out how much mortgage you can get:

• Income Multiples: Most lenders base your borrowing limit on a multiple of your income, generally between 3.5x and 5x your yearly earnings.
• Company Profits: Some lenders go a step further and look at your company's net profits (after tax). If your business is doing well, this can help increase the amount you can borrow.
• Credit History: A good credit score and clean financial record will boost your chances of getting a bigger mortgage and better interest rates.
• Affordability Rules: Lenders also check your overall financial situation, including any existing debts and monthly expenses, to make sure you can comfortably afford the mortgage repayments.
• Specialist Lenders: Working with lenders who specialise in mortgages for company directors can improve your chances of getting the best deal and maximum borrowing power.

In summary, while your salary is important, your company's profits and your overall financial health also play a big role. If you want to get the best mortgage deal as a director, it is worth getting expert advice tailored to your unique situation.

Do Dividends Count as Income for a Mortgage?

In the UK, most lenders do accept dividends as part of your income. However, many will only consider one main income source per borrower. If most of your earnings come from dividends, this might limit how much you can borrow because dividends can fluctuate with your business's performance.

Specialist lenders tend to be more flexible and may accept multiple income sources, giving you a better chance of securing the mortgage amount you need.

Do Retained Profits Count Towards My Mortgage Application?

Some lenders will consider retained profits within your business when calculating how much you can borrow. This is especially helpful for directors who leave money in the company for tax efficiency.

However, not all lenders include retained profits, so it's important to work with a mortgage broker for company directors who can point you to lenders that do take a more flexible view of your income.

Are Company Directors Considered Self-Employed?

Yes, most mortgage lenders class limited company directors as self-employed, particularly if you own 25% or more of the business. That means your application will be assessed under self-employed mortgage criteria, and you'll need to provide more detailed financial records than a typical employee.

Our specialist self-employed mortgage broker can help guide you through this and ensure your income is properly presented.

Is It Hard to Get a Mortgage as a Company Director?

Getting a mortgage as a company director isn't necessarily harder than other mortgage types, but it can come with unique challenges. The key is providing clear, organised proof of income, such as tax returns and company accounts.

If you're financially stable, have a good credit history, and provide the necessary documents, you stand a good chance of mortgage approval.

Working with an experienced mortgage advisor or broker who specialises in company director mortgages can make the process smoother and increase your chances of success.

What Documents Do I Need for a Mortgage as a Company Director?

To apply for a company director mortgage, you'll typically need to provide:

• 2 years of company accounts
• SA302 tax calculations and HMRC tax overviews
• Business and personal bank statements
• Evidence of salary and dividend payments

These documents help the lender understand your income and the financial health of your business. Keeping your accounts up to date and working with a knowledgeable broker can make the process much smoother.

Should I Use a Specialist Mortgage Broker?

If you're a limited company director, using a specialist mortgage broker can make a big difference when applying for a mortgage. Unlike standard brokers, our specialist broker in Wembley understands the complexities of self-employed income, whether it's a mix of salary, dividends, or retained profits.

We know which lenders are more flexible with company directors and can match you with mortgage deals that suit your unique financial setup. This can save you time, reduce the risk of rejection, and even help you borrow more than you might through a high-street lender.

Our specialist mortgage advisor can:

• Match you with lenders that understand company structures
• Help you access better rates
• Ensure your application highlights your full income potential
• Guide you through the paperwork

Whether your income is made up of salary, dividends, bonuses, or retained profits, our broker can present your finances in the best light to the right lender.

Need Help with Your Mortgage Application?

Our expert mortgage brokers in Wembley understand company director income and can help you secure the best mortgage deal.

If you want mortgage advice tailored to directors of limited companies, contact our mortgage broker in Wembley at 020 3813 7800 or fill in our contact form.