Whilst Limited Liability Partners are treated as self-employed for mortgage purposes, it doesn't mean getting a mortgage needs to be stressful or difficult. It's just a case of understanding how lenders will assess your income and partnership history.
In this short guide, you'll get answers to how much you can potentially borrow, what documents you'll need to prove your income, and other common questions.
- How much can I borrow as a Limited Liability Partner?
- How do mortgage lenders assess LLP income?
- Can I get a LLP mortgage if I have bad credit?
- Can I get a mortgage if I've only been a LLP partner for a year?
- What size deposit do I need?
- How is mortgage affordability worked out?
- What documentation will lenders want to see from me?
- Finding the right LLP mortgage deal
How much can I borrow as a Limited Liability Partner?
The current industry benchmark figure for a self-employer mortgage applicant is capped at 4.5 x either single or joint earnings. Some lenders, however, will consider 5 or even 5.5 x income for LLP equity partners working in a well paid professional role, such as a solicitor, architect, barrister etc.
With that said, where the partner is making a joint application, the potential to borrow a higher multiple will be dependent upon the second applicant's circumstances.
Can I borrow against my most recent year's net profit share?
If your most recent year's net profit share has increased from previous years, it may be possible to borrow against the latest figures. If you fit their criteria, a tiny handful of lenders will consider it.
The vast majority of lenders will use the average of the past two years figures, or the latest year if lower.
Where the latest year's accounts or self assessment show a large increase or decrease, the lender may ask for further information about the cause.
How do mortgage lenders assess LLP income?
Mortgage companies assess your partner income in one of two ways. The first uses your share of the partnership net profit, as evidenced from the LLP's finalised accounts.
Alternatively, some providers will use your individual share of total partnership income, based on your SA302 tax calculations.
Income is usually averaged over the last two year's accounts/tax calcs, but some banks and building societies can use the latest year, aiding affordability.
Can I get a LLP mortgage if I have bad credit?
Yes. All lenders have their own criteria and tolerance for adverse credit applications. But there are a few key factors determining whether they'll proceed with your application, including:
- How recently the adverse credit occurred
- The severity and frequency
- The value of the credit event (default, CCJ etc)
Some mortgage lenders only accept mild adverse. For example, a single CCJ, for less than £300, satisfied two years ago.
Other, more specialist providers have a higher tolerance, and often have different tiers of mortgage products available for various levels of poor credit. These niche providers are also likelier to consider severe bad credit, like ex-bankruptcy, or an IVA.
Can I get a mortgage if I've only been a LLP partner for a year?
Yes, it's possible. The majority of lenders we work with, require a minimum of two or sometimes three years partnership accounts and/or SA302 self assessment tax calculations.
From the lender's' perspective, a self-employed person represents an increased lending risk compared to someone in full-time employment. So a few years trading history provides reassurance that the LLP business is sustainable, and the equity partners income is stable.
However, there are a few specialist providers willing to consider mortgage applications from Limited Liability partners with just one year's accounts. To mitigate the increased risk, some lender's may require a larger deposit of 10-20%.