A huge number of clients that come to Enness are self-employed, so we understand that as a director of a limited company, there are many ways you may decide to structure your income to best suit your needs. However, many lenders (especially on the high street), are not always so understanding. If you do not pay yourself in a traditional method of salary and dividends, and use directors loan income instead, then you may come across some obstacles when it comes to getting a mortgage.
Firstly, you will need to consider the explanation of your income. Accountants are usually behind the structure of directors loan income, and in many cases, clients themselves do not understand how their income is organised and why. This can pose a problem when it comes to providing an explanation to lenders and why your income is being paid in this way.
Generally, lenders will be more than willing to take an open-minded approach to director’s loans, if we can assure them this structure will no longer continue, with the client being paid in salary and dividends in the future. However, we appreciate that many of our clients will want to keep their structure, so we would ensure we approach lenders that understand this.
Lenders will generally be wary due to a lack of evidence, as director’s loans tend to be structured in a way that funds do not always appear clearly in the accounts or demonstrated on an SA302 (a HMRC self-assessment form)
Another thing to consider is the loan size. Lenders who will take a more common sense approach to this form of income are private banks. Lenders generally have a minimum loan size of £750,000, so if your loan size falls below this requirement, a private bank may not be an option.
Essentially, we work with every type of lender across the UK, so whatever the situation for you, we will work with lenders happy to consider your type of income and provide the best solution for your individual circumstances.