Setting up a limited company
Setting up your own limited company as a contractor or planning to do so, can help you to manage your personal income. Doing so provides a range of tax efficient processes which make it the preferred choice for many. It means that a qualified accountant can take care of your income and tax, so that you don’t need to waste time on completing complex tax returns.
For most contractors the frustration can arise when attempting to secure funding for a mortgage. Mortgage lenders in the UK maintain a consistent procedure when checking income for contractors. For an applicant using a LTD company to manage income, the vast majority will only accept the salary and dividend drawings from the last two to three years of trading history.
For many contractors this can be a problem, as generally speaking, the company is being used to handle the regular income received as the sole employee and director of the company. As such, the turnover of the business reflects the income you personally take on an annual basis and any funds left in the business can be taken at any given time.
A contractor embarking on their new career path will have, at worst no accounts and at most, under the minimum of 2 years that lenders require. However, there is another approach available; one that will allow you to utilise all of your income to help with your mortgage application.
So where does that leave you when attempting to secure a mortgage?
At Contractor Financials we have built longstanding relationships with many lenders and this has allowed us to create our own innovative process for securing mortgage funding for contractors. This bespoke process means that we can not only help you to raise the borrowing you require for a mortgage, but it also provides contractors with access to high street lenders and the range of lower level interest rates that would normally be unavailable to them.
The first step is to provide satisfactory income evidence for the lender, in order to confirm that your affordability range is higher than the salary and dividend income would initially suggest. Rather than supplying your LTD company trading accounts, we have agreed with lenders that we can supply a current contract in order to provide current income evidence.
How are we different?
The method used varies from lender to lender, but essentially we will agree with an underwriter a level of income, by annualising either your hourly or daily rate of pay. By doing this, we are able to provide you with the means to use a majority of the income that you are paying into your company, in order to demonstrate to the lender that affordability should not be a concern.