So, you started off as the document filer in the mailroom straight out of school. With little or no experience in business, you’ve fought and clawed your way up and learned everything you know along the way from your peers and now you have made it to the top of the tree. As a reward, you have been promoted to a partner in a business. All the hard work, learning, and grafting has paid off and you now want to make the most of it by purchasing the perfect home for you and your family. But are you still employed or are you now a business owner? What does it actually mean to get a mortgage as a partner in a business?
It may not have crossed your mind as you rise to the top of your company, but different mortgage lenders have different criteria around partners in a business when it comes to mortgage lending. Some consider you employed still whereas others consider you to now be a self-employed individual. Each distinction makes a difference to which bank or building society will lend to you and how much, so it is very important to get the right advice when getting a mortgage.
Shareholding Partner In A Business Vs. Non-Shareholding Partner
The first thing you need to know and establish is whether or not you are a shareholding partner or not. It is pretty self-explanatory, but a shareholding partner is someone who have been made a partner in a business and as part of this promotion has been given shares in the company. The latter has not been given shares.
With most limited companies, if you are a shareholding director with 25% shares or more, then you are considered self-employed and will be treated as such at application stage. Profit from the shares you own can potentially be used as part of your income for mortgage affordability. If you own less than 25% shares, then you will be treated as employed and no profit from your shares will be considered in your mortgage affordability.
If you are a partner in a business, it is most likely an LLP (Limited liability partnership) where each partner in the business has limited personal liability for debts or claims of the partnership. Partners of an LLP aren’t held responsible for the acts of other partners. For most lenders, a partner in an LLP who owns any shares in the business will be treated as self -employed and will be subject to the lender’s standard self-employed criteria.
This is usually a minimum of 2 years in the position with 2 years tax documents to show income received from shares in the business. Some lenders will allow 1-year’s figures, but this is limited. This is usually standard criteria, but different lenders have different criteria, so it is always best to do some research with the help of a qualified mortgage advisor such as Oportfolio.
Some lenders will also say that any business partner receiving profit share as part of their salary package, irrespective of share of equity, will also be treated as self-employed and will need to provide the same documents mentioned above. So even if you have a basic salary and a profit share on your payslip as a partner, you can still be treated as self-employed by some lenders.
Finally, if you are a partner in a business but do not receive any equity share (you may just receive an increased basic salary), then a lot of lenders will consider you to be an employee of the business and will consider your basic salary or any bonuses or commission you receive on top as your income. The evidence required by lenders is again subject to each different bank, but you may be able to submit one month’s payslip or a contract of employment.
How To Get A Mortgage As A Partner In A Business
Becoming a partner in a business is a great achievement for any professional and should be something that is celebrated. If you are looking to get a new property or simply remortgage your current property but have recently become a business partner, you deserve to get the best financial advice possible and get a mortgage that celebrates your promotion. The best thing to do is to call our advisors today to have a free no obligation chat with a member of our team. Our advisors can go through all of the specifics of your new role and find the best route forward for you.
If you or anyone you know is a partner in a business and needs help with getting a great deal on your mortgage, give Oportfolio a call today for expert partnership mortgage advice.