THE E4M BLOG

limited company director mortgages
09 FEB '19
I AM SUCCESSFUL LIMITED COMPANY OWNER – HOW COULD A LENDER REFUSE ME??BY ADMIN

John runs a small marketing consultancy company that has been doing well over the past 3 years, but he found that keeping profits in his business made his search for a mortgage extremely frustrating. Here we tell his story, and how we were able to helps

“TAKING THE PLUNGE” - BECOMING A LIMITED COMPANY DIRECTOR OWNER
4 years ago John decided to leave his job as a marketing consultant to set up his own business in his locality in Edinburgh. John decided that it would be more professional for the business to be a limited company, so he formed a relationship with a local accountant who helped him with this, as well as providing accounting services on an ongoing basis. John had some savings to get the business established, so rented a small office and invested in a great looking website. John knew that he had a hard first year ahead of him, but with his good reputation within his industry and some determination, he believed he could create a viable business

A RESOUNDING SUCCESS
John’s first year was challenging. He gained just a handful of new projects, and with the initial set-up costs he made a loss for 2015. But, in the second year he won 6 lucrative contracts that sent his business in to lift off. John’s new business was busy, cash flow positive, and getting busier month-on-month. After 3 great years of increasing profits, John now employs 2 other consultants and the outlook remains positive. Having established his business, John’s next life goal was to stop renting and buy his own home in the Edinburgh area

AS A PRUDENT, SUCCESSFUL COMPANY DIRECTOR, JOHN WAS LEFT FRUSTRATED IN HIS SEARCH FOR A LENDER
John had a 20% deposit for his purchase budget, no debts, and a successful business to his name. He thought that for a mortgage lender he would be a good proposition, but he hit a wall. “The numerous lenders I approached said that I didn't earn enough to achieve the lending amount I was looking for. The problem was that they used my personal tax returns to measure my income, and wouldn’t look at the fact that I had a thriving business earning significantly more profit than I wanted to pay myself. I told them that I could prove that I owned 100% of a successful business, and could have paid myself more if I wanted to, but they said that it wasn’t in their policy to take this in to account”

WHAT WAS JOHN’S CHALLENGE?
Put simply, John paid himself significantly less than the profits his business generated, because he didn’t need a larger income, and he had decided that it would be good to keep profits in the business to help with its ongoing growth. The lenders John spoke to, according to their criteria, were interested mainly in what John took from the business in the form of salary and dividends for mortgage lending purposes. They took the view that John’s business is separate entity to him, leaving him short on borrowing potential

HOW DID WE HELP JOHN SOLVE HIS PROBLEM?
When John first got in touch he was sure that he wouldn’t be able to achieve his aspiration of buying in Edinburgh, but was willing to contact a mortgage broker as a “last ditch effort”. John’s luck had just changed, because we are accustomed to arranging limited company director mortgages, and we knew certain lenders who take a different approach in these circumstances. We approached our contacts at these lenders to check that they would be interested in John’s case, and soon we had a shortlist of prospects

WHAT HAPPENED?
We found a lender who was willing to take in to account the profits John’s business made. More specifically, the lender was willing to base their lending on John’s share of net profit (in this case 100%, because he was the sole owner) + the salary he paid himself. This achieved the lending John required and he bought a flat he liked in Newhaven. “ I only wish I’d approached Experts 4 Mortgages from the outset – I could have saved myself a lot of worry and wasted effort. It’s a lesson learnt that sometimes you just have to put your faith in someone with the experience and knowledge to get the job done. With Experts 4 Mortgages my faith wasn’t misplaced, and I couldn’t have done it without them”

CAN WE HELP YOU?
We can’t guarantee that we can help you, because each case has different wider circumstances, and lenders change their lending policies over time. However, if you are a limited company director we invite you to get in touch to see if we can help with your goals. We have the expertise to increase your chance of success

IS JOHN REAL?
We've changed his name and some of the soft details surrounding this case to protect his identity, but the fundamentals of his case are real, and we deal with numerous cases like his annually

WE FEATURE BLOG POSTS TO ENRICH THE CONTENT AND INTEREST IN OUR WEBSITE. THE ABOVE, AND POSTS LIKE IT, DO NOT CONSTITUTE ADVICE, AND THE ACCURACY OF ANY INFORMATION WITHIN IS NOT GUARANTEED. OUR CLIENT CASEBOOK POSTS ARE A USEFUL WAY TO ILLUSTRATE HOW WE MAY BE ABLE TO HELP CLIENTS FACING MORE COMPLEX CIRCUMSTANCES. THIS DOESN'T NECESSARILY MEAN WE WOULD BE ABLE TO ASSIST YOU WITH YOUR GOALS, BECAUSE YOUR WIDER CIRCUMSTANCES MAY BE DIFFERENT, AND LENDERS' CRITERIA CAN CHANGE OVER TIME

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