You’ve decided to borrow via a limited company, but will you get accepted for a mortgage? Gary McKenna consultant mortgage broker explains what lenders are looking for when it comes to applications from limited companies.
Now as you may expect the criteria for limited company lending varies from lender to lender, however there are some fundamental requirements across the board which increase your chances of receiving finance.
- You’re a homeowner or existing landlord
The combination of being a first-time buyer and first-time landlord will restrict your options massively. This isn’t to say there aren’t options, but be prepared for higher rates and stricter affordability checks.
- You have permanent rights to reside in the UK
The vast majority of lenders will only accept landlords with permanent rights to reside in the UK. For those with no ties to the UK, funding options will be limited and pricing will be higher.
- You’re a UK tax payer
Lenders will want to see that you are earning a taxable income in the UK. This can be from rental income, pension, part-time employment, full-time employment, dividends, etc.
- You have a property type suited to your level of experience
If this is your first buy to let property there are more finance options available on vanilla property, for example a 2/3 bed freehold house let on a standard AST to professionals. If you start looking at the more complex property types – HMOs, high rise flats, multi-units, etc. your lending options will be restricted.
In theory, we have a solution for almost all clients and property types, however it is important that you understand that the more complex the scenario, the less options there are and the higher the pricing tends to be.
Looking to apply?
To ensure your case goes through as smoothly as possible, I thought it might be worth highlighting a couple of points that you should be aware of before you submit your application.
Personal adverse credit can’t be ignored – despite being in the name of a limited company lenders will still run credit searches against the individual directors. If you or any of the directors of your company have any adverse credit this must be mentioned on the application form.
Make sure your tax documents are in order – especially important if you have property related income. Lenders have started to tighten up on assessing this type of income i.e. matching number of properties to gross rent on tax returns, ensuring personally owned properties are paying personal levels of tax and vice versa for Ltd Co’s. Make sure you have everything in order when applying. You may be asked for SA302s, tax overviews and in some cases a full tax return.
If you have any further questions, do get in touch and we can walk you through how the application process will work for your specific circumstances.
Gary McKenna has left Mortgages for Business for pastures new. For more information or for any questions relating to this blog, please contact the Buy to Let Team on 0345 345 6788, where one of our consultant mortgage brokers will be happy to assist.
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