Self Employed Mortgage Advice – Increasing Profits
Self Employed Mortgage Advice Doncaster
Many self-employed applicants worry about how much they can borrow for a mortgage, and if they’ll even qualify. The business they run may have been performing well, however, some try and keep their tax liability as low as possible, so they can reinvest in their businesses.
Their accountants often encourage putting their expenses through as high as possible, to keep profits at a minimum. This, unfortunately, leaves them with a problem when it comes to borrowing money. Sadly, you can’t have it both ways!
Fortunately, some lenders will assess your income in a variety of ways. There are lenders out there who will lend more than others. It’s our job to find the one most suited to our client’s circumstances.
For example, a lot of lenders will only look at the last two years of your earnings, whereas we have access to some who will only look at the latest year. This really benefits applicants whose earnings have recently risen.
For a Limited Company Director, the average of the last two years’ salaries plus dividends is generally all most lenders need. There are some instances however, where this varies. Some lenders only see you as employed if you own a certain percentage of the company. This counts even towards Directors, so they may consider going off your payslips from the last 3 months.
Some business owners run organisations that are highly profitable but don’t need the income so take a low dividend. This type of applicant can be at a disadvantage by the salary + dividend method, but there are lenders out there that will consider using the net profit of the Limited Company as a solution to the problem.
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You can always contact us with the projected figures if your business is due to complete a set of accounts. Our advisors can calculate what your maximum borrowing would be based on a draft of the figures, although the accounts would need to be finalised prior to a formal mortgage application.
In summary, it really is quite challenging calculating maximum borrowing capacity for a self-employed applicant – you could easily go to 10 different lenders and get 10 different answers! Using a friendly mortgage broker like ourselves would probably be the best port of call If you need to maximise your borrowing capability. We would urge any Company Director to do so!
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Your situations aren’t listed above and are more unusual/complex?