How Limited Company Contractors Can Secure a Mortgage
How Limited Company Contractors Can Secure a Mortgage
Blog Article
Contractors working through a limited company often face unique challenges when applying for a mortgage. Traditional lenders may not fully understand how your income is structured, which can lead to confusion or even rejection. However, with the right strategy, limited company contractors can successfully secure a mortgage.
1. Understand How Lenders Assess Income
Lenders may assess your income differently depending on how you draw funds from your limited company. While some only consider salary and dividends, others will take your full company profit into account, which can significantly increase your borrowing potential. Working with a lender who understands limited company finances is key.
2. Prepare Detailed Financial Documents
To improve your chances of approval, ensure your financial records are in order. Common documents required include:
Two years of company accounts
SA302 tax calculations
Tax year overviews
Recent bank statements
Current contracts
Having professionally prepared accounts from a certified accountant can also add credibility to your application.
3. Avoid Retaining Excess Profits Unnecessarily
Some contractors leave large sums of money in their limited company to reduce personal tax. However, this may limit the income lenders consider. If you're planning to apply for a mortgage, speak with your accountant about drawing more income temporarily to improve your affordability profile.
4. Maintain a Strong Credit Profile
Even with strong company profits, your personal credit score still matters. Pay your bills on time, avoid taking on new debt before applying, and check your credit file for any errors. A good credit score adds confidence for lenders.
5. Use a Specialist Broker
A mortgage broker experienced with limited company contractors can help present your income accurately and connect you with flexible lenders. They’ll also know which lenders are most likely to accept your application based on your company structure.
Conclusion
Getting a mortgage as a limited company contractor is very achievable. By preparing your financial documents, working with the right broker, and understanding how lenders assess your income, you can improve your chances of securing a great deal.