Getting A Mortgage For Company Directors | CMME Explains

February 11th, 2021

2021 Is The Year For Your Mortgage For Company Directors

As we approach mid-February the year is properly underway, we’ve passed our January new years resolutions and we’ve completed dry January or Veganuary, it’s time to get down to our real goals for 2021 – like a mortgage for company directors.

With 2020 behind us, 2021 is the year for the home of your dreams, whether that’s your first home or renovating the one you have – you deserve to make your home the space you’ve dreamed of in 2021.

So where does that start? It starts by figuring out how you, as a company director, can get the mortgage you deserve.

What’s Covered In This Blog

• The Challenges Of Getting A Mortgage For Company Directors

• Proving Your Income

• Company Types & Mortgages For Company Directors

• Top Tips For Getting Mortgage Ready In 2021

• Are You Mortgage Fit? What Every Self-Employed Professional Should Know [Video]

• Useful Resources

The Challenges Of Getting A Mortgage For Company Directors

Being a business owner and an independent spirit, you’ll be familiar with the variety of challenges that can face you as a self-employed professional. Inherently, by choosing to work the way you do, you’re a problem solver – by necessity – you’ve navigated working for yourself and now we’re here to help you navigate getting a mortgage for company directors.

When it comes to getting a mortgage, mainstream lenders often don’t fully understand the way you work and that can mean you can borrow less and are subject to higher rates than necessary.

Being a company director shouldn’t affect you getting the mortgage of your dreams, here’s everything you need to know to get the mortgage of your dreams this year.

Proving Your Income

When you’ve made the jump from a permanent position to contracting, you may be wondering how the new working status will affect your chances of securing a mortgage. The reality is that the majority of lenders have designed the mortgage application and processes with standard employees in mind. As such, one of the main hurdles faced by self-employed professionals with high street lenders is the lack of understanding some lenders have when approaching self-employed incomes.

When it comes to your mortgage application there are two main elements that you will be asked to provide evidence for:

Income Evidence

Naturally, as a mortgage is a huge financial commitment, evidence of your income is required for your application. As a company director you will typically be asked for:

• 2-3 years of company accounts
• 3 months of bank statements
• (Where applicable) partner’s payslips or accounts
• (Where applicable) partner’s bank statements

Financial Readiness

In addition to proving you can afford the mortgage; the lender will look for indicators that you are a low-risk borrower and evidence of your identity such as:

• 5-10% (minimum) deposit saved
• Clean credit history
• Minimal debts
• Personal ID: driver’s license or passport
• Proof of address

For more information about what documents will be required for your mortgage check out CMME’s Ask The Expert: Deposits and Documentation.

Company Types & Mortgages For Company Directors

Mortgages are mortgages; they’re the same whether you’re employed, freelance or a limited company. The only differences relate to the evidence of income that you must provide.

Sole trader

Lenders will want to see at least one years’ trading history, though most will want to 2 years’ history – and some will want three. The more evidence of successful trading that you have, the more lenders your mortgage advisor can consider.

Limited company

If you operate as a limited company, your income probably consists of a salary and dividends. Lenders will need to consider both as your income. In some instances, lenders may be able to use your operating or net profit in addition to your salary.

Partnership

Lenders will assess your income according to your share of the profits.

Top Tips For Getting Mortgage Ready In 2021

1.Check your credit report

Lenders have become increasingly risk-conscious and are continually on the lookout for reasons not to lend. A good deposit and a satisfactory income is often not enough to secure a mortgage.

That is why it is essential to keep your credit rating up to scratch, leaving the lender no reason to turn you down. It’s important to note that a poor credit score does not guarantee that you will not be approved for your mortgage application – in the same way, a good score does not guarantee approval – though a strong credit score is the first step towards approval.

Check out CMME’s free guide on credit rating

2. Improve your credit score

In light of step one, step two is applying the knowledge that is gained in being aware of your credit score and what sits on your credit report.

Here are some quick tips for improving your credit score:

• Register on the electoral roll
• Check for any errors and have them removed
• Pay off existing debt
• Don’t do lots of credit checks
• Pay your bills on time, don’t miss payments

Try an app like Credit Karma for keeping track and finding tips for improving your credit score.

3.Decide on your budget

In light of Coronavirus, many lenders have reduced the availability of high Loan-To-Value (LTV) mortgages meaning that you will often require a higher deposit than you may have previously, somewhere in the 10-15% range is more prevalent than a 5% in the current climate.

Lenders tend to favour individuals who have higher deposits, but this is true to anyone looking for a mortgage and not just contractors.

To access the most competitive rates you should be aiming to save anything between 10 and 25%. There are mortgage options out there for less than that, but they will be on a much higher rate.

We asked our experts everything you need to know about deposits, check it out here.

4.Get your paperwork sorted

You will need to provide minimal documentation to support your application. Ensure your CV is up to date as it will be used to prove your skills and experience.

Did you know?

The average time spent looking at a CV by recruiters is only 5-7 seconds. 

You will also need to obtain a copy of your current contract as this will be used to demonstrate your earnings. Using both of these documents we can avoid any issues to do with affordability.

Our process is a simple as that. We won’t ask you for heaps of documents we might not need, we know the way you work, and we’ll make the process as easy as can be.

We asked our experts everything you need to know about documents, check it out here.

5.Investigate the market

Before you start your mortgage process, it’s a good idea to have a look at the market – investigate what type of mortgage might suit you and your needs, what area would suit you and the costs associated with your new mortgage and property.

Whether this is your first mortgage or your fifteenth, preparing in advance can help make sure your goals are realistic and achievable.

For an idea of what’s coming up this year for contractors, which might affect you and your mortgage plans, take a look at our recent article here.

 6.Speak to a specialist

The truth is that most lenders have little understanding about the contracting market, and as a result, their standardised procedures do not accommodate contractors.

We have agreed bespoke underwriting agreements with a comprehensive range of lenders enabling us to secure mortgage funding based on a multiple of your contract rate alone.

Hear From CMME’s Head Of Mortgages, Simon Butler, On Getting Ready For Your Company Director Mortgage 

Useful Resources:

• Progressing Your Mortgage Plans Amid Lockdown 3 | CMME
• CMME’s free guide to Contractor Mortgage
• Contractor Mortgage, Calculators and Tips for 2021 | CMME

Whether you want to talk specifics or are just after some general advice, CMME can help. Speak to us today on 01489 223 750 for a completely free, no-obligation mortgage consultation. Or click the button below.