A great many Enness Global Mortgages clients are self-employed and have successfully run their own businesses either in the UK or internationally for many years. Whilst such clients are often extremely successful, being self-employed can make it extremely difficult to secure a large mortgage.
Enness Private Office regularly helps wealthy self-employed individuals to get a mortgage. Lenders view different types of self-employed mortgage borrowers differently, from sole traders to the Directors of limited companies. It’s simpler for a sole trader to get a mortgage, in the sense that the income stated on the tax calculations is used for affordability.
The view the lender will take also depends on how your income is actually structured; a company director/shareholder has the ability to leave figures in the company rather than drawing themselves down a salary or a dividend, which is how a company director would receive their income.
To complicate matters further, lenders will calculate how much a self-employed client will borrow in different ways. The majority of lenders will use the client’s salary and dividends average over the past three years, similar to the above. However, there are a number of lenders who will use the latest years’ figures which is often advantageous as generally accounts increase year on year.
Other lenders will ignore the dividends drawn by the applicant and will use the net profit in the accounts, as they understand not all directors want to draw down a salary to reduce tax liabilities. This can either be operating profit (before any tax deductions) or post-tax profit, depending on the lender.
There are a number of attractive options currently available. For example, one private lender we work with uses net profit before tax to calculate affordability. Another takes the operating profit for the company, which is even more generous than taking the profit before tax.
However, if you are a high net worth individual, the best rate and option for you is likely to be a bespoke rate we have negotiated on your behalf. If you’re looking to purchase or refinance a large property, it’s likely to be one of the most important financial decisions you’ll make in your life—we have the experience to help and would be delighted to advise you further.