Self employed applicants can sometimes encounter hurdles when obtaining a mortgage.
The good news is with the support of an experienced Mortgage Broker in Doncaster working by your side, we may be able to overcome these mortgage hurdles together.
First things first, there are specific lending criterias that fit sole traders and Limited Company Directors. Each lender has its own policy and the maximum amount they will allow you to borrow can vary between lenders.
The maximum amount you can borrow for a mortgage will be assessed on your net profit, this can be confirmed by speaking to your Accountant, or direct from the Inland Revenue.
Some lenders average your last two or three years’ net profit but other lenders use your latest year. If your net profit has decreased the lender will usually base everything on the latest year and you will have to explain why it has dropped.
Any Limited Company Director who owns 20-25% or more of the shares in the business, will be deemed by lenders as a self employed applicant.
The same rules are applied with the averaging too, as the average figure will be worked out by your salary and declared dividends.
At some point, your Limited Company will be performing well in terms of net profit but the Directors are not drawing their dividend – these types of applications can impact the maximum borrowing capacity because they aren’t able to declare as much income.
There are some lenders out there that will consider using your share of the net profit, as opposed to salary and dividends.
The minimum trading period for any applicant who are self employed in Doncaster or Limited Company Directors is one year. That being said, some lenders will want to see two or three years more.
If you have recently formed a Limited Company after a period as a sole trader under the advice of your Accountant, then there are other lenders out there who can look into this, depending on if it’s the same line of work.
If you would like to further discuss your options, don’t hesitate to get in touch and book your free mortgage appointment today to speak with a Mortgage Advisor in Doncaster today.
They’ll guide you through your process. We can also send you a form for your Accountant to complete, which will help us tailor-make a recommendation designed to meet your personal situation.
Date Last Edited - 30/05/2022