Lenders consider different rates, conditions, and criteria for assessing the affordability of sole traders, limited companies, and limited liability companies (LLPs). This article will point out the important points about getting a mortgage for each company.
Is it easier for sole traders to get a mortgage?
Calculating income is somewhat simple for sole traders. If you are a sole trader, you and your business are legally one entity, and all profits belong to you. Lenders value this interest. On the other hand, tax bills show the total income received and the total tax due, and your lender will probably check this information alongside your business accounts.
Lenders are looking to see if your income has increased or decreased in recent years. If it has increased, they may consider the average income of the last two or three years. However, lenders may look at the latest and lowest figures if it has decreased. Lenders also look at applicants’ invoices to determine if money will likely come shortly.
What are the criteria for lenders to pay Limited company mortgages?
For limited companies, the business is a separate legal entity from the applicants, so the business profit and the applicants’ profit are considered separately. Most lenders focus on the applicants’ income. This income comes from the basic salary and dividend payment. So make sure you have a clear history of both in the past few years. Your trading accounts are also likely to be considered a sign of your reliability, so make sure your trading accounts are up to date.
However, some lenders may also consider accrued dividends, so you may want to discuss this with your lender before applying.
Read Olso: Lloyds
How do lenders evaluate limited companies?
For institutions with a limited company model, lenders consider each partner’s share of the profits. So make sure your accounts reflect this.
What will other factors help you get Limited company mortgages?
Regular work experience
If you have a good relationship with many customers and can prove that you have had frequent business with them, this will greatly affect the lender’s decision to offer you good rates and terms.
Proof of fixed work in the future
If you plan for future work, this will increase your chances of convincing the lender. Especially, if you are a contractor, you may even be asked to show what you have prepared for the future to prove that you can maintain or improve previous years’ income.
Significant deposit
When you first think about getting a limited company mortgage, it is important to note that the larger your deposit, the better your chances of getting the limited company mortgages. So cut down on what might be considered luxuries in the months leading up to your limited company mortgages application so you can save more on deposits.
Good credit history
Lenders will check your credit score and check your business credibility. Before applying, clear your outstanding debts and ask your credit score from a trusted service or limited company mortgages broker to see what might negatively affect your lender’s decision to provide the mortgages.
Update accounts to reuse limited company mortgages benefits
Once you’ve gotten your limited company mortgages, keep in mind that your credit rating process will not end forever. While repaying the mortgage instalments, you may move to a new home or have a better deal. In this case, keep in mind that you will probably have to go through all the steps mentioned above again to prove your ability to continue repaying. So make sure you keep your accounts up to date.
Be careful not to cut back on your taxable income.
If your accountant uses legal methods to reduce your taxable income, it may be difficult to prove your affordability in the limited company mortgages application process. Because lenders use this amount to calculate how much they can lend to you. In other words, the higher your taxable income, the more money you can get a limited company mortgages. In this regard, and to prove your affordability, it is better to talk to a limited company mortgage broker so that your income is properly and fully available to the lender. A limited company mortgages broker knows how the lender views applicants’ income. This is important because you want to make sure that the lenders consider all of your income.
Shop around
For the best rates, do much searching and use the services of a limited company mortgages broker if possible. Because they can make a perfect comparison with the knowledge and experience they have about the lenders’ products. So, your chances of finding a limited company mortgage at the most reasonable rate will increase.
Use the services of a good limited company mortgages broker.
SWG Mortgages specialist advisors understand your needs and goals for getting limited company mortgages. After that, evaluate how much you can get while evaluating your credit score. They also explain how mortgages work, the different options available, and the fees associated with each. We will help you find the best options for your goals and situation. They will manage the limited company mortgages application process for you on your behalf, from the mortgage application to the final settlement, so that you will not be stressed during these steps. SWG Mortgages advisors also compare your existing limited company mortgages with other lenders and check if there is still the best option for you.
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