If you're a company director, getting a mortgage can seem like an uphill battle. You may have been prudent and not taken unnecessary income from your Ltd company, but lenders are assessing you on the money you have personally withdrawn from your business and restricting how much you can borrow.
This happens because most lenders are set up for straightforward salaried employees or sole traders. When income comes from company profits, many lenders struggle to assess it properly.
The result is that you're told you can borrow far less than expected, you're asked for personal tax returns that only show the bare minimum of income you need right now. Or even worse, you're declined despite having built up a solid business that is making excellent profits.
The problem is company director income doesn't fit neatly into a standard payslip like a PAYE employee. Profits before and after corporation tax, directors loans, salary, dividends, pension contributions, are often misunderstood or ignored altogether. To the wrong lender, that complexity looks like risk, even when your income is stable, tax efficient and predictable.
Meanwhile, to add insult to injury, employed family and friends are getting mortgages easily, simply because their often smaller income is easier for lenders to understand on paper.
Applying to the wrong lender as a company director could lead to wasted time, unnecessary stress and a declined application, leaving you no closer to purchasing the property you want.