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Limited Company Director with a CCJ

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Limited Company Director with a CCJ

Jim Overall explains how the mortgage process works if you are a limited company director with a county court judgment (CCJ).

How do lenders assess a limited company director’s mortgage application if they have CCJs?

Any application for a mortgage will be credit checked by the lender. It’s no different if you’re employed or you’re a limited company director. The credit check will look for anything in the background that could cause issues – and if so, we’d deal with that at that point of application.

Will my company’s trading history or accounts help offset my personal CCJs?

Ultimately, a CCJ is recorded on your credit file. The fact that your company is doing really well won’t get rid of that.

When a lender checks your credit, they will look at when that CCJ was registered and whether it’s been satisfied. If they don’t like what comes up on the credit file, the company’s performance won’t affect how that lender views your application.

A limited company director would also need sufficient income through the limited company to get a mortgage at all. The CCJ will be a separate issue.

Do mortgage lenders consider whether the CCJs are in my personal name or my company’s name?

Effectively, if you’re the limited company director you’re liable for that company, and a CCJ showing up for the company could still count against you.

If it’s totally separate from you, it may not be an issue. It wouldn’t have an impact if it’s not showing up under your personal record. But anything on your personal credit file will potentially impact which lenders we can go to.

How many years of company accounts will I need to prove affordability?

Pretty much every lender looking at a limited company director will want a two-year track history. That’s the case whether they’re looking at salary and dividends or your salary and share of profit before or after tax.

They will ask for two years’ accounts or two years’ tax calculations and tax year overviews. One lender, however, can work off one year’s trading accounts if needed.

It’s a fairly mainstream lender, so you’re not going to be impacted by only having one year’s books. Typically most lenders want two years’, but you can do it with one year’s details.

Can retained profits or dividends be included in my income for mortgage affordability when I have CCJs?

Yes, although it will depend on affordability, and if we need to use salary and profit after tax. That’s usually a way to maximise what you can borrow.

Having a CCJ in the background knocks out a lot of lenders that won’t work with bad credit. We’d need to know the details of the CCJ to see what we’re dealing with.

If we’re just looking at salary and dividends, it will still knock out a lot of lenders. The CCJ will just reduce the number of lenders overall. We will look at who’s available once we take the CCJ into account. If you need to use salary and profit after tax, there may only be a couple of adverse-type lenders to approach.

Are there mortgage lenders that work with limited company directors who have adverse credit?

Potentially. We would look at your credit file to see what caused the bad credit. Then we would look at the lenders that will accept the bad credit – which will possibly be the more adverse-type lenders.

It then depends how we’re looking at the income from the limited company. Some lenders purely look at salary and dividends and not profit after tax. If we’re looking to maximise your borrowing, we may have to find a lender who’s firstly okay with profit after tax plus salary, and secondly, is okay with that CCJ.

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How will CCJs affect the mortgage options available as a limited company director?

It will limit the lenders you can go with. Mainstream lenders aren’t necessarily going to like a high-value CCJ that’s not satisfied, or one that was recently registered.

Some lenders will look at when it was registered and if it’s satisfied – if it fits their criteria, such as being registered over three years ago, they may accept it not being satisfied.

Ultimately, the severity of the CCJ will determine which lender we go with.

Does it make a difference when applying for a mortgage if my company pays me a low salary but has strong profits?

It depends on whether we need to maximise the income for a client who’s a director of a limited company.

Sometimes you might pay yourself a low, consistent salary as determined by your accountant, so you don’t pay too much income tax on your salary. You then pay yourself a dividend – as dividend tax is lower than the tax on a higher salary.

To maximise income for limited company directors, we can use salary and share of profit before or after tax. If, for example, you’re paying yourself a low salary and a small dividend, but you’ve got good profit after tax, we can maximise your borrowing with a lender who will use your salary and share of profit after tax. There are many of them, and quite a few are mainstream names.

What level of deposit would a director with CCJs typically need to secure a mortgage?

For a limited company director application, as long as it fits standard criteria, you could be buying with as little as a 5% deposit.

If the CCJ means we have to go to a more adverse-type lender, many only have products at a 90% Loan to Value, which means you need a 10% deposit. It could even be a 85% Loan to Value with a 15% deposit. It all comes down to the individual situation.

However, depending on the size of the CCJ, the mortgage amount and the lenders available, you may still be able to do it with a 5% deposit.

What can I do as a company director to strengthen my mortgage application despite having CCJs?

Time is a great healer. If a CCJ is over three years old and satisfied, many lenders will accept that.

So if that CCJ is outstanding, it might help to get it paid off – although some lenders accept unsatisfied CCJs. It all depends on the level of the CCJ and when it was registered.

Typically, three years down the line if it’s cleared and the rest of your credit is good, you could be okay. A lot of people can’t necessarily wait three years, though, in which case we’ll just deal with what’s in front of you at the time.

How can a mortgage broker help?

Even for us, CCJs can be a bit of a minefield. We might try an Agreement in Principle with a lender and not expect it to go through, only to be surprised that it does. There’s no definitive answer on who you’ll be accepted with.

Once we’ve seen the credit report, we can take all the facts into account – when it was registered, if it’s been satisfied and how much it was for. Then we know which lenders to avoid.

You wouldn’t be wasting any time. We take all that away from you and look at all the options. We might try an Agreement in Principle maybe with a higher option and also with a lender on a better rate, to see if we can get you a better deal.

Key Takeaways:

  • A County Court Judgment (CCJ) is recorded on your personal credit file, and your company’s successful trading history will not remove or offset it.
  • Limited company directors typically need a two-year track history of accounts or tax calculations to prove affordability.
  • Having a CCJ significantly reduces the number of lenders available, potentially limiting you to adverse-type lenders.
  • To maximise the amount you can borrow, lenders can assess your income using your salary plus share of profit (before or after tax), which is often necessary when a CCJ limits lender choice.
  • The best way to strengthen your application is to ensure the CCJ is over three years old and satisfied, as many lenders will accept this.

 

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