The Mortgage Guide For LLP Equity Partners

Our jargon-free guide to getting a mortgage as a partner in a Limited Liability Partnership

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Graham Cox - Founder & Cemap Mortgage Advisor | SelfEmployedMortgageHub.com
Graham Cox
Director & CeMAP Mortgage Advisor

As a LLP equity partner, mortgage lenders will assess your mortgage application on a self-employed basis. Whilst it's true that getting a LLP mortgage isn't as straightforward as it would be for someone's whose employed, with the right knowledge and advice, it needn't be difficult either.

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?

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 self assessment tax return

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%.

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What size deposit will I need?

It all depends on your circumstances, and the type of property you want to buy. But 5 percent deposit mortgages are available for LLP equity partners.

To qualify, the partnership will need to have been trading at least two years, and lenders will want to see the corresponding HMRC submitted accounts and your SA302 tax calculations.

There's one caveat. Flats and other types of leasehold property are viewed as slightly less secure collateral by banks and building societies.  To mitigate the risk, lenders usually require a larger deposit of 15-20 percent. Just something to bear in mind.

How is mortgage affordability worked out?

Before 2014, working out how much a borrower could afford to was simple. A mortgage provider simply applied a multiple to the borrower's income to determine how much they were prepared to lend.

No longer. In response to the 2008 financial crisis, mortgage underwriter's must now account for a whole swathe of other factors. These include the applicant's credit score, and any ongoing credit commitments such as personal loans, car finance or credit card debt. Providers also consider, amongst other things, whether the applicant has financial dependents, or pays child maintenance.

Lenders must also 'stress test' the borrower's ability to service the mortgage payment, were interest rates to move much higher. The current test level is at 3% above the lender's Standard Variable Rate (SVR).

So before seeking a mortgage to purchase a property, consider reviewing your debts and any other outgoings. Pay them off if possible. Not only will it improve your creditworthiness, but you'll potentially be able to borrow more as well.

What documentation will lenders want to see from me?

To evidence your LLP member income and trading history, most lenders will want to see most or all of the following documents:

  • Your SA302 tax calculations for the past 2 years (assuming you've been trading that long).
  • The HMRC Tax Year Overview (TYO) docs for the accompanying years.
  • The Limited Liability Partnership accounts
  • Your last 3-6 months business bank accounts

Your accountant, if you use one, will be able to provide the tax calculation documents. They are generated from their online accounting software when submitting your tax return.

If you submit the tax return yourself, the SA302 can be downloaded in pdf format from the HMRC online portal, along with your corresponding Tax Year Overview documents.

The SA302 is a declaration of your individual share of total partnership income for the tax year and is verified by the corresponding year's Tax Year Overview (TYO) doc.

Your TYO docs, and if applicable, your SA302 docs, can be downloaded at https://www.gov.uk/sa302-tax-calculation

For a full breakdown of all the documents lenders require for a LLP mortgage application, please click here.

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Finding the right LLP mortgage deal

As self-employed mortgage specialists, SEMH can quickly find the most suitable LLP mortgage deal from our panel of mainstream and niche lenders, and present your application so it stands the best chance of being accepted.

For an informal chat to discuss your options, please call 0117 2051695 or click here to get a fast, no-obligation quote.

Graham Cox

About the author

Graham Cox is the founder of Self Employed Mortgage Hub, the trading name of Hub FS Limited. Based just north of Bristol, SEMH is an independent, whole of market broker and a true specialist in self employed mortgages, helping business owners across the UK find great mortgage deals.

Graham's market commentary and analyis is regularly quoted in the national press and media, including The Guardian, Telegraph, Financial Times, and BBC Bristol.