Affordability and maximum loan -how debt to income ratio and credit score affects income multiples.
Credit File for £2 – get credit file for £2 without monthly fees
Mortgages for LTD company Directors – how salary, dividends and net profit used in max loan.
On the Market – portal that allows agents to have greater control of propety listings.
Nestoria – aggregation from other property portals.
Nethouseprices – Past sale prices and estimated current values.
Prime Location – site run by zoopla.
PurpleBricks– online property portal with local agents.
Right move – largest property portal in UK.
Residential People – free to list portal.
SmartNewHomes – another site bought by zoopla, but dedicated to new builds only.
Tepilo – site set up by TV presenter Sarah Beeny selling for a fixed price. May not give an advantage of less competition as the site says same properties will be promoted through RightMove and Zoopla.
Zoopla – Portal from a large conglomerate that owns many financial sites – potential duplicates with other big sites.
HMRC Stamp duty calculator
Monthly Payment Calculator (downloadable excel format)
Salary vs Dividends vs Company Profit
Company directors does not always take a full salary from the company. Some choose to retain most of the profit in the company. This can pose a problem when applying for a mortgage. Lending in general is based on affordability based on income received. Even though a company director has the option to withdraw funds from the profit anytime, some lenders still want it to show on personal drawings.
Good news is that there are two types of lenders for company directors. Those that will base income on salary and dividends and those that will base income on salary and company net profit after corporation tax.
If you hold more than 20% share of a limited company you are treated as self employed. However, unlike for sole traders, lenders allow company directors to show their income in several ways. It also means proof on income needs to be in the form of accounts or SA302s. Some lenders will also accept or require an accountant’s certificate from a qualified accountant.
Salary and Dividends
Many accountants advice company directors to take a small salary and the rest of the income in the form of dividends for efficient taxation purposes. Lenders will accept gross salary and dividends or income before taxation and personal allowance.
Share of net profit and salary
Available to company directors with shareholding of more than 50%. However, may need confirmation from company accountant that retained profit is not for other purposes such as expansion or tax payment, and the profit is sustainable.
Minimum trading length or trading history
This can be a problem is you only have been trading for a short time or that your trading year cross over two financial years. Some lenders may accept a projection of profitability from an accountant.
Most high street lenders need minimum 2 years of trading history. This is to establish that the company is successful and the income is sustainable.
However, there are lenders specialising in company director mortgages who will accept one year’s proof of income and a projection.
Latest year or average of two years income
Another important lending criteria to pay attention is if the latest year’s income will be used to calculate income multiples. This is another issue that affect company directors.
Some lenders use average of last two year’s income, while specialist lenders use latest year’s income. This can be tied to whether the profit has been increasing or decreasing. If the profit has increased year to year over 3 years then the latest year may be used.
If the profit has yo-yoed over 3 years, the average over three years is used.
If the profit has decreased, then latest year will be used.
Even if the company is doing fantastically currently, the income for mortgage purposes is really based on historical trading. This is a disadvantage when compared to a PAYE employee, for they could have started a new job three months ago at a new salary and a lender would advance a loan based on the latest pay slip.