Navigating the property market as a company director can be both exciting and daunting when it comes to securing a mortgage.
At NEST Mortgage and Financial Solutions, we understand that familiarity with lenders’ criteria simplify the process immensely. This guide aims to help you understand how your income as a director influences your borrowing capacity.
Understanding Income Assessment
For company directors, the way income is assessed can be complex. Lenders typically look at your salary plus dividends, or sometimes your share of the company’s net profit. Here’s a brief overview:
Years of Accounts: Most lenders will need to see at least two years of finalised accounts to understand your income stability. Although a few may accept just one year with a higher deposit.
Loan-to-Income Multiples: Generally, you could borrow up to 4.5 times your annual income. However, for higher earners, some lenders might offer up to 5 or even 6 times.
Loan-to-Value (LTV): This varies by the property type and the amount you are borrowing. For example, you might find 5% deposit mortgages available if you have two years’ worth of accounts. However, expect to need at least a 15% deposit with only one year’s accounts.
The Role of Your Business’s Financial Health
Sustainability of Income: Lenders look at several years of accounts to check the sustainability of your earnings. A longer business history can reduce perceived risk, potentially leading to better mortgage terms.
Deposit Requirements: The amount of deposit you’ll need can depend on how long your business has been operational. Newly established businesses may require larger deposits.
Additional Considerations
Using Company’s Net Profits: Some lenders will consider your salary and your share of net profits, which can be beneficial if you retain profits within the business.
Bad Credit: Having a history of bad credit doesn’t necessarily prevent you from getting a mortgage. However, it may limit your options to specialist lenders who might charge higher rates.
Documentation: Be prepared to provide documentation, including company accounts, SA302s, and bank statements, both personal and business.
Why Speak to a Specialist?
At NEST, our expertise in working with company directors means we can guide you through these complexities with ease. Whether it’s evaluating the best way to present your income to lenders or understanding the intricacies of various mortgage products, our team is here to help.
Are you a company director looking to get the right mortgage? We’ll help you understand how much you can borrow, what documentation you’ll need, and how to prepare for your mortgage application. At NEST, we put you at the heart of everything we do, ensuring your journey to securing the right mortgage is as smooth and successful as possible.