Here’s a shortened Q&A from a recent customer who owns his business.
My wife and I are having a bit of a nightmare finding a mortgage lender that will accept my financial situation and lend us the amount of money that we need to buy our new home. Over the past 8 years we have built our business from the ground up and my wife and I own all of the shares.
Last year we had the most profitable year in our history and on the advice of our Accountant, only took out what we needed in PAYE and dividend income. The rather nice size balance is sitting in the company as retained profit. As we traded so well last year we felt that it was now time to enjoy the fruits of our labour and move home, finding the house of our dreams.
We went to our Bank of 16 years that knows us well, holding both our personal and business accounts. They declined us on affordability telling us that retained profit belongs to the company and not us.
It’s our company in which we own the golden share!! It makes no sense to us.
Could you help us?
This issue that that has taken the mortgage rug from under your feet is prevalent throughout the mortgage lending industry. Moreover we receive lots of “rescue” enquiries from customers whose Mortgage Brokers don’t quite understand what’s going on……..or wrong!
At Enhanced Wealth Ltd we do understand.
As a Director of a Limited Company you are savvy and take the advice of other professionals such as Accountants; to not take their tax planning advice would of course be rather silly. The problem is that the majority of lenders use the argument that people should only be able to borrow based on their actual personal SA302 taxable income using the technicality that income left in the company is the Company’s………….and not theirs.
Well as such people hold a golden share in these Companies, we disagree and so do some forward thinking lenders. These lenders have chosen a policy that accommodates Company directors that have chosen or been advised not to withdraw profits in the form of dividends, rather using retained profits or share of retained profit to work out mortgage affordability.