Getting a Mortgage as a Company Director

Being a company director can make things more complex when applying for a mortgage, but help is available to take the hard work out of the process. In this guide, you will learn how to get a mortgage as a limited company director, what lending criteria you will need to meet and much more.

Can you get a mortgage as a company director?

Yes. If you are a limited company director with a 20-25% shareholding in the business, lenders will class you as self-employed, and it’s possible to get a mortgage if you trade this way.

Company director mortgages aren’t much different to mortgages for other types of self-employed individuals, such as partners and sole traders, but there are specific things you need to know about regarding the way affordability and eligibility will be assessed.

Although there are no lenders who will refuse you for a mortgage purely because you are a company director, some mortgage providers are better equipped than others at meeting the needs of people who work in this capacity. They can sometimes be difficult to find, but the good news is that our mortgage brokers can introduce you to them as part of our service.

How affordability is calculated

Most lenders will look at your salary and share of the dividends over a period of 2-3 years and work out average earnings over this timeframe. Your average income from these sources will typically be multiplied by 4.5 to arrive at your maximum mortgage borrowing.

While most lenders will use this method to calculate mortgage affordability, it’s important to note that others will do it differently. A smaller number of mortgage providers will let you borrow based on net profit if a significant amount of capital has been retained in the business.

The amount you can borrow on a company director mortgage can vary considerably from one lender to the next. Not only do some lenders factor in net profit, others use a higher income multiple than 4.5 to work out maximum borrowing, all the way up to 5.5-6 times income.

If you need to borrow extra, your best bet is to find a lender who uses higher income multiples and will take all of your earnings into account. Our mortgage brokers have deep working relationships with such lenders and often have access to exclusive deals through them.

Proving your income

You will need to present the following documents to evidence your income:

• 2-3 years’ accounts from a certified accountant, or…
• SA302 statements and a tax overview from HMRC, and…
• Three months’ bank statements (personal and company accounts) 

Important: It is possible to get a company director mortgage with less than two years’ accounts. There are lenders who accept one year’s figures, but they may request an income projection for the coming year to calculate an average for 24 months.

Eligibility criteria for company director mortgages

In addition to assessing your mortgage affordability, lenders will also be keen to ensure you fit the eligibility criteria for a company director mortgage. The requirements are as follows:

• Profitability: You are likely to find a higher number of mortgage options if your company can evidence stable profits and did not make a loss in the last year.
• Industry track record: It is possible to get a mortgage with just one year’s trading history but your choice of rates and deals is likely to be better if you have a track record in your current industry - i.e. worked in the same sector prior to your current role.
• Credit history: If you or your business has bad credit, your choice of lenders is likely to be more limited, especially if the issues are severe ones or they occurred recently.
• Deposit requirements: Deposit requirements for company directors are no different than they are for other borrowers. It is possible to get approved for a mortgage with 5-10% of the property’s value, but putting down more could mean a better rate.
• Other requirements: You should speak to a broker if you will be aged between 75 and 85 during the mortgage term, or if you are buying a non-standard construction property, as these risk factors could mean that you need to use a specialist lender.

How to get a company director mortgage

You can save time and money by beginning your mortgage journey through Teito. Follow the steps below to get started with your application for a company director mortgage:

Get your documents ready: You will need to prepare your documents evidencing proof of income, proof of address and ID, and evidence of any fixed expenses.

Compare rates and deals:  You can do this for free on Teito! As a company director, all of the rates and deals from across the market that you find on our service are available to you, assuming you meet the rest of the lending criteria for them.

Speak to a broker: This is the final step in our process. After you have selected the mortgage you want, one of our brokers will contact you for a free, no-obligation chat, during which you will receive bespoke advice. Your advisor will oversee the application process for you and help you secure the best rate - get started below:

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Which mortgage lenders are available?

No mortgage lenders will turn you down outright because you are a company director, but some have specific policies for borrowers who trade this way, and this could affect the amount you can borrow or whether you are approved at all. You can find examples below:

• Halifax: Treats all company directors with a shareholding of 25% or more as self-employed and imposes no specific caveats on this employment type.
• HSBC: Will consider share of net profit after corporation tax, averaged over the last 2 years, along with their salary, or use the latest year’s figures (whichever is lowest).
• Natwest: Uses share of salary and dividends for last 2 years for affordability. Will take an average figure over those two years if profits are increasing, but will just use the latest year’s figures if the business’ accounts show declining profits.
• Bath Building Society: Will use 100% of salary plus dividends or the applicant’s share of net profit. They will request three years’ accounts as proof of income.

The above lenders are a snapshot of a vast market, presented for example purposes. You can compare rates and deals from these lenders and more for free with Teito - get started here.

Limited company buy-to-let mortgages

It is possible to get a buy-to-let mortgage if you are a company director, and it is also possible to purchase this type of property through a limited company. There can be significant tax benefits to buying property through your business, but they don’t apply to everyone.

If you are considering taking out a buy-to-let mortgage through your limited company, we recommend doing the following:

• Read our in-depth guide to limited company buy-to-let mortgages
• Speak to a tax advisor about whether there are benefits for you
• Speak to a mortgage broker to ensure you get the best deal

Why use Teito for your company director mortgage?

You can use Teito to save time on your mortgage application by sourcing your own rate and deal through our free service. All of the products you see are available to company directors, and we have mortgage brokers on hand to make sure your application goes smoothly.

Here are just some of the reasons why limited company directors choose Teito:

• Exclusive rates and deals are available
• Our brokers specialise in company director mortgages
• We are five-star rated on leading review websites
• It takes minutes to secure an agreement in principle

Ready to source a mortgage and take advantage of a free, no-obligation chat with a broker who specialises in company directors? Get started here.