Key facts:
Clients were looking to purchase their first home together as a couple and had found the perfect starter home.
With a decent sized deposit that they had worked hard to save, our clients were looking forward to starting their new life together as homeowners.
There was however, one thing that concerned both clients. Both clients were company directors of their own separate limited companies. As company directors, they did not receive just a basic set salary and were therefore unsure about how much mortgage they could get.
Our client:
Both of our clients were self employed company directors and had worked hard to establish themselves and their businesses in their respective industries.
Having each built up a good income source over several years and having managed to save a sizeable deposit, they had decided that they wanted to purchase their first home together.
Whereas employed people generally receive a basic salary with possible bonuses, commission or overtime on top, company directors receive their income slightly differently.
Company directors normally receive a salary and a dividend from the business which can vary depending on different factors such as the profitability of the business and tax advice from an accountant.
This income is usually recorded and displayed through company accounts and tax computations. When it comes to company director mortgages, the majority of mortgage lenders will look at an average of the last 2 or 3 years of income and will base their maximum lending amount on this.
Although both of their businesses were flourishing and their latest years income was significant, our clients were concerned that an average of the last 2-3 years of income would not be enough to achieve the mortgage they required.
How did we help with a company director mortgage?
The clients decided that they would seek professional help from a company director mortgage specialist and contacted Oportfolio to see how we could help.
Providing mortgage and protection advice for many years, our advisors know all the ins and outs of securing mortgages for company directors, so we were more than happy to help.
We arranged an appointment with the clients to talk though their options and form a plan of action to try and get them the most mortgage possible based on their income.
Our advisor assessed the client’s tax computations for each of their businesses and researched different lender’s criteria to see which one would be the most viable and beneficial for them.
Being experienced in company director mortgages and using Oportfolio’s exclusive contacts, our advisor approached a high street bank and contacted the mortgage underwriter directly to discuss the merits of the case.
By positioning the businesses and their success and growth in an attractive and reassuring way. Our advisor managed to get the underwriter to agree to use both client’s latest year income for affordability rather than using the standard 2-3 years average.
This meant that that maximum mortgage available to the clients increased drastically and they were able to afford the purchase of the new home without any affordability issues.
What was the rate for the company director mortgage?
The loan was secured as an interest only mortgage on a fixed rate for 5 years at 1.95%. After the fixed period, the rate would revert to the bank’s 4.24% standard variable rate.
At which time we’ll contact the clients again to discuss remortgaging onto a new competitive fixed rate and re-structuring their mortgage.
The overall cost for comparison is 3.7% APRC. The arrangement fee was £999, and early repayment charges were applied. The mortgage term was 25 years.
