How we can help
- We are expert Mortgage Brokers and can explain all the Eligibility Criteria:
- We will review your contractual agreement or formal role within the family business.
- We will look at rules such as Minimum income requirements depending on the lender.
- Proof of stable employment status with the family business for a significant period.
- Possible checks on the business’s trading history and profitability.
- Payslips and bank statements proving personal income.
- We will review the Business accounts that are signed off by a qualified accountant.
- Tax Year Overviews and HM Revenue & Customs forms SA302 if self-employed within the family business.
- There is potential for enhanced scrutiny from lenders and measures to ensure the application proves financial independence, so it’s best to get Expert Advice.
- Advice on how to avoid common pitfalls during the mortgage application process when working for a family business.
What are the Mortgage lending rules if you park for a family member and need to get a Mortgage?
Getting a mortgage whilst being a part of a family-owned business often involves a comprehensive assessment by the lenders. This assessment might include checking the Companies House records to ascertain your part in the family business, reviewing your income history to establish its stability and ensuring no abrupt spikes raise concerns of irregularities.
The lenders could also validate whether your salary fits your role in the family business and verify the consistency of your payslips over a period of at least three months or more. Additionally, they may request financial documents related to the family business, such as profit and loss statements and tax returns.
For applicants who are making use of dividends from the family business as a source of income, lenders usually require a consistent record of dividend income for a minimum of two years, and they’re likely to categorize these applicants as self-employed. Applicants who possess less than 20-25% of the family business might be considered as an employed candidate, with lenders assessing affordability based on the income reflected in their payslips.
The duration of your employment within the family business and your share in it can significantly influence the history required for securing a mortgage, making it a critical aspect in this scenario.
Beyond the financial assessments, lenders may also take into account the overall financial health and stability of the family business itself. This might involve a review of the business’s accounts to ensure it has a solid track record and is capable of sustaining the income levels of the applicants in the foreseeable future. In scenarios where market fluctuations or other external factors have negatively impacted the business, lenders might require additional evidence of recovery plans or future profitability projections. It’s essential for applicants to be prepared with comprehensive documentation that not only highlights the strength and reliability of their personal financial situation but also that of the family business as a whole.This dual focus ensures that lenders have a holistic understanding of the applicant’s financial standing, thereby increasing the chances of mortgage approval.
In addition to the financial requisites, the applicant’s personal relationship with the family business and its members can also play a pivotal role in the mortgage application process. Lenders may seek assurance that the family dynamics do not adversely affect the business’s financial stability or the applicant’s ability to repay the mortgage. While it’s not common for lenders to deeply probe into personal family matters, having a clear, formal structure within the family business, delineating professional roles and responsibilities, can bolster the applicant’s case. It demonstrates to lenders that business operations and decisions are conducted objectively, reducing the risk of potential financial mismanagement influenced by familial relations. Thus, applicants are advised to prepare evidence of their professional contributions to the business and any existing agreements or contracts that formalise their role and remuneration.
This level of preparedness showcases not just the viability of the business but also the applicant’s proactive and responsible approach to their financial obligations, further enhancing their credibility in the eyes of lenders.
Given the nuanced complexities surrounding mortgage applications for individuals involved in a family business, it is highly advisable to engage the services of a mortgage broker who specialises in this area. A seasoned broker can provide invaluable assistance, navigating the intricate landscape of lending criteria and advocating on the applicant’s behalf.
They possess the expertise to present the application in a manner that highlights the applicant’s strengths, addressing any potential concerns lenders might have regarding the stability and profitability of the family business. Furthermore, brokers often have access to a broader range of lending options, including those not directly available to the general public, thereby increasing the chances of securing a mortgage with favourable terms. Their guidance can prove instrumental in demystifying the application process, ensuring that all necessary documentation is meticulously prepared and submitted, ultimately streamlining the path to mortgage approval.
