Subbie Tip #17 – How Your Income Is Calculated For Affordability Purposes

This case study shows how important it is to choose the right lender when it comes to getting the right mortgage offer.

One question that I get asked regularly is whether as a Director of a Limited Company it’s still possible to use Gross CIS Income paid directly to the Director’s own company when it comes to calculating mortgage affordability.  The answer is yes; but there is a catch and two simple rules that apply:

  1. You must own 100% of the limited company – if you own less than 100% the CIS income paid to the company is not a true representation of your share ownership (or income for mortgage affordability purposes).
  2. You must not be paying wages to other staff (Admin or your own Subcontractors) – if you are acting as both contractor (to subcontractors beneath you) whilst your company is also subcontractor to a larger firm, the income received to your business account is not all for your own work and some has to be paid on to your own Subcontractors.

A previous client in this position once asked me “how would the lender even know as they don’t look at company accounts to assess the mortgage?”.  My answer was very simple… I would know!  The lenders I access for clients trust me to act with honesty and integrity.  Plus, mortgage lenders are not daft; they know that a building site labourer will earn approximately £100-£150 per day and a foreman or highly skilled tradesman maybe £200-£250 per day.  So, if your own limited company is turning over a huge CIS income the lender will quickly realise that there are other Subbies to be paid from that.

I am always on hand if you need mortgage advice or need help getter a bigger mortgage from your Gross CIS Income; call me on 08000 306705 or drop me an email to: david@cismortgage.co.uk

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE