Enness Global Mortgages regularly helps wealthy self-employed individuals get a mortgage. Lenders view different types of self-employed mortgage borrowers differently, from sole traders to the Directors of limited companies.
The view the lender will take depends on how your income is actually structured; a company director/shareholder has the ability to leave figures in the company rather than drawing themselves down a salary or a dividend, which is how a company director would receive their income.
To complicate matters further, lenders will calculate how much a self-employed client will borrow in different ways. The majority of lenders will use the client’s salary and dividends average over the past three years. However, there are a number of lenders who will use the latest years’ figures which is often advantageous as generally accounts increase year on year.
Other lenders will ignore the dividends drawn by the applicant, and will use the net profit in the accounts, as they understand not all directors want to draw down a salary to reduce tax liabilities. This can either be operating profit (before any tax deductions) or post tax profit, depending on the lender.
We’ve put together a few of our favourite self-employed mortgage products that are currently available for you to consider if you’re looking to secure property finance.
Best income stretch product
Rate: 3.19% 2 year fixed
Max Loan/LTV: this is an 85% product but they go up to 90% (£1m max)
Fee: 0.25%
Benefit: Will use the latest years’ net profits after tax in company accounts and any directors’ salaries. They will also do 6 x income and go up to £1m so this is proving popular at the moment as it’s giving the best income stretch.
Best interest-only policy product
Rate: 1.89% 2 year fixed
Max loan/LTV: 85% product and max loan is £750,000
Fee: £1999
Benefit: Will use average of last 2 years’ net profits before tax and go up to 5 x income and also have a very good interest only policy.
The flexible product
Rate: 2.34% discounted variable
Max loan/LTV: 75% IO or 80% C&I
Fee: 1%
Benefit: Very flexible approach to all types of self-employed scenarios, no strict policy but will use either the latest years’ salary and dividends or net profits, depending on what you need to use.
The competitive rate product
Rate: 2 year at 1.79%
Max LTV/loan: 85% £750k max
Fee: £999
Benefit: Very cheap pricing and will use the latest years’ net profit figures but if there is a huge jump in profit then they like an explanation. Very competitive rates.
The tax calculation product
Rate: 2.27% 2 year fixed
Max LTV/Loan: 85%, £750,000
Fee: £1,499
Benefit: While it’s not technically policy, the lender will often use latest years’ figures from an SA302/tax calculation which outlines salary and dividends. Cheaper option for those who need to use these figures rather than net profit.
If you’re self-employed and looking to secure property finance, contact us today on +44 (0)203 758 9393 or email [email protected].
