What you need to know about company director mortgages – what to do to achieve the mortgage success you deserve. Getting the best result for you requires careful planning and preparation. Here is a step-by-step guide to help you understand the process.
Check your eligibility – company director mortgage requirements
Before you apply, you should check whether you are eligible – essentially whether you tick the boxes lenders require. That means that you should usually be a UK resident and have a good credit score. Lenders will expect you to be able to provide proof of your income and have a deposit of at least 5-10% of the property value. If your credit score is weaker or your earnings less certain then you may need a higher deposit of 15-30%.
Assess and prepare your finances – company and personal
Proving enough income for the requirements for company director mortgages usually needs more time and preparation. Salaried employees have it easier. They can simply provide payslips. The good news is that if your company is more than two years old and you own only a small shareholding, then many lenders will treat you as an ordinary salaried borrower. They may still want to see your business accounts.
But few UK company directors are that fortunate, particularly if you own a larger share of the business. In that case you’ll need to prepare the paperwork on both your salary, dividends, company finances and other sources of personal income, your expenses, assets and liabilities. You should also have a good understanding of your credit score and any debts that you have.
If you own less than 20-33% of your company.
As a director, if you own a minority of the company, usually less than 20% but some lender will allow up to 33%, then you’ll be treated as a salaried employee. So you’ll need to produce 3 payslips and sometimes a P60 tax form for the last year. Bonuses will usually be counted for affordability but are often averaged over the past 1-3 years. You may still need to produce company accounts for the past 2-3 years to prove that your income from the business is sustainable.
Choose a broker specialist in the company director mortgage process
There are many specialised mortgage lenders in the UK that offer mortgages for company directors. Our clients are often surprised by how many high street lenders will do the same. You’ll achieve the best terms, lender and a stress-free process if you use a specialist broker who is an expert in the requirements for company director mortgages, and the process involved. They can compare different lenders and their mortgage products to find the requirements and deal that best suit your situation. That means a lender that accepts your credit, earnings and company situation. As well as the interest rate, the length of the mortgage term and the fees associated with the loan.
Get mortgage pre-approval from a lender
Before you start looking for a property, you should get pre-approved for a mortgage. This will give you an idea of how much you can afford to borrow and so make your property search far simpler. Pre-approval, also known as a decision in principle (DIP) or agreement in principle (AIP)can take as little as an hour for mainstream borrowers. The process for company director mortgages, can take some days, sometimes longer.
Find a property and make an offer
From this stage on you can draw breath. Once you’re pre-approved for company director mortgage requirements, the process is now little different to an ordinary mortgage. You can now start looking for a property. The right estate agent can make a lot of difference. Remember that despite their reputation, they are human too! Treat them and the property seller with honesty and respect and you’ll build a relationship that will help in any negotiations or difficulties along the way. Visit the property at least twice and wander the area, research schools, shops and amenities before you think about making an offer. Sellers will take your offer much more seriously if they know you have mortgage pre-approval.
Get a survey
You should always get a survey to assess the condition of the property. Any problems it uncovers can help you negotiate a lower purchase price, or to plan financially for any work that needs to done. The survey will also mean that you are insured via the surveyors liability insurance for any surprise structural or material problems with the property. Ask friends or your estate agent for recommendations for a good surveyor and make sure you’ve agreed costs in advance.
Confirm your property offer and timing
Once you have the survey in your hands, you can confirm your offer. Be clear about your timing, any sale you need to make of your existing property, exchange and completion dates. A quick exchange is always preferable if you can achieve it. That way you avoid surprise and have the comfort of knowing your new home is securely yours.
Confirm the final mortgage offer with your lender
If your offer is accepted, your lender will provide you with a confirmed mortgage offer. You should review the offer carefully and ensure that you understand the terms and conditions. This is particularly important in the process for company director mortgages where your financial situation is likely to be more complex. Be certain that any declaration you make is factually correct to avoid later misunderstandings. Remember that false declarations will be treated as fraud!
Conveyancing – complete the paperwork
Ask friends or your estate agent for recommendations for a good conveyancing solicitor and make sure you’ve agreed costs in advance. A good solicitor will give you valuable advice and guidance. Make sure you are clear with them about your requirements for the purchase. Don’t be shy in calling them and pushing them to exchange contracts as quickly as required. But make sure that no material issues remain unresolved before doing so.
Completion – the end of process for company director mortgages
Completion should be straightforward. Final contracts are signed, the mortgage lender and you pay the balance of the purchase price. You now become the proud owner of your new property and can now relax and get back to running your business. Before you do so don’t forget to set up the payment instructions for the monthly interest and repayments to your lender! Congratulations.