Mortgage Case Study – Ltd Company

Mortgage Case Study

Ltd Company – Low salary and dividends, good net profit

Jamie Franklin of BM Musical Instruments has been running a successful instrument supply and rental company for a number of years. Due to his relatively low living costs he minimised his personal tax by only taking a very small salary and annual dividends to support his lifestyle. With twins on the way he needed to upsize the family home, which he knew he could comfortably afford as he would simply increase his personal drawings. After approaching his current mortgage provider and a number of other high profile banks he was disappointed that they could not make an offer to meet his requirements.

Although he could evidence the retained profit and that the business was growing year on year, they were only prepared to work off the income taken and declared to HMRC. One call to Seico and his mind was put to rest. Our advisor very quickly identified that a lender was needed that would simply work off his share of his net profit plus his salary. Although the full share of net profit had not been drawn over the years, he could have drawn it down if he had needed to. The accounts showed the turnover increasing whilst costs remaining stable, so with a healthy retained profit along with an increasing operating profit an agreement in principle was obtained well in excess of the loan required and within one week he had the mortgage offer he wanted.

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