Mortgages for limited company directors

A director mortgage is a residential mortgage for someone who owns and runs their own limited company, usually holding a significant share of it. The mortgage is in the director's own name, on their own home, but the income used for affordability comes from the company, which makes it different from lending to employees with payslips alone.

Lenders usually treat directors with a stake of around a fifth or more as self-employed, though the exact threshold varies. Directors with a smaller stake may be assessed as employees on their payslips.

Most lenders assess director income as salary plus dividends, taken from tax calculations and tax year overviews. Many directors take a small salary and larger dividends, so lenders that use only salary and dividends may see a lower income than the company really earns. Some lenders instead use the director's share of net profit, which can include retained profit.

Using a share of profit can support a larger loan for directors who leave money in the company, but fewer lenders do it and they usually want accountant-prepared accounts. Lenders also check that the profit is stable, and they may ask why it has risen or fallen.

Directors who also hold rental property in a company are assessed separately for that lending, covered on the limited company buy-to-let mortgages page.

Many lenders ask for two years of accounts or tax calculations, and some accept one year. A few will consider directors with less, using year-to-date figures or projections, especially where the director has worked in the same field before. A longer and steadier record gives the widest choice of lenders and the most borrowing power.

Lenders usually average income over the years provided, and some take the latest year if income is rising or the lower year if it has fallen. An accountant's reference or certificate is often requested.

Lenders usually ask for SA302 tax calculations with matching tax year overviews, company accounts, business and personal bank statements, and sometimes an accountant's certificate or reference. Directors relying on a share of profit may also need to show the full company accounts and confirm how much profit has been retained. Recent figures are expected.

Keeping accounts filed on time, and drawing income in a steady pattern, makes the application simpler. Large one-off dividends before an application can raise questions.

Contractors who work through their own limited company can often be assessed on their day rate instead of salary and dividends, with some lenders using a calculation based on a set number of working weeks. This can suit contractors with short trading histories but a steady record in their profession, provided there is a current contract.

Lenders usually want a minimum time contracting or in the same line of work, and a current contract with a clear renewal history. Gaps between contracts are looked at closely.