Buying a home can be complicated by lots of factors. One thing that might make it tricky is being a business owner. As the owner of a business, even a successful one, you’re often seen as more of a risk by mortgage lenders. Your income can fluctuate and the future of your business might not be secure. Even if you take mortgages out of the equation, there are still some unique factors you need to take into account if you want to buy a property. What important things should you be watching out for as a business owner who wants to be a homeowner?
The Future of Your Business
The future of any business is never certain. Even one that is performing well now could experience hardships and a downturn. So your business’s future is something you need to consider carefully before buying your own home. What are your plans? Is your business growing? Do you expect any difficulties in the near future or further down the line? These aren’t just important questions to ask before taking out a mortgage but are also necessary to ask yourself when deciding whether to buy a home. You need to know that your business has a good chance at survival.
What You Can Borrow
The amount of money you can borrow might be affected if you’re a business owner. Typically, mortgage lenders will offer you somewhere between 4.5 to 5 times your annual income. However, if you’re self-employed, they might not be so keen on the higher multipliers. Instead, they could limit how much you can borrow to 4 times your income or less. Other factors will make a difference too, such as how large your deposit is. And your status as a business owner won’t always have an effect. But it’s worth taking into account.
How to Prove Your Income
Another tricky issue when you’re looking for a mortgage is how you can prove your income. Employees provide evidence of their income through their payslips, but you might not have those if you’re self-employed. You might need to show evidence of your accounts or, if you own a limited company, your salary and dividends. Each lender can be different, so meeting requirements to prove your income isn’t always straightforward. You will often be asked to show at least two or three years of accounts, although some lenders may be happy with just one year.
Buying Through Your Company
If you’re thinking about buying a property, you could have the option of doing so through your limited company. But is this a good idea? There can be some benefits to doing this, whether you’re buying a property for personal use or to use as a rental. Tax and tax planning benefits, as well as reducing personal risk, can be reasons to make this choice. However, there are also potential complications to watch out for. It’s something to consider carefully before you decide what’s right for you.
Being a business owner can make buying a home more difficult, but sometimes it has advantages too. Do your research and get advice if you need it.
