Can I use goodwill payments from my business for a mortgage?
Published 14th August 2017
I’ve got a very complicated set of accounts as a result of changing from a partnership to a limited company a few years ago. Most lenders we’ve spoken to don’t understand the circumstances or my accounts, hence why I am struggling. It makes sense to any accountant who would look at our figures. Basically when we went limited we created goodwill for the 2 directors and this is being drawn down by 100K a year for 5 years to be tax efficient (ends in 2017). Several banks we’ve been to will not take this into consideration as they can’t see this goodwill on tax returns. My situation as it stands is that I have made an offer on a property which has been accepted so I need a mortgage asap.
Thanks for getting in touch, happy to help!
You’re right to point out that what accountants deem sensible is not necessarily in line with what lenders think, and often this lack of understanding is the main reason creditworthy borrowers are turned away. Most underwriters would have trouble with your scenario let alone the in-branch advisors – That’s fine though as we love the difficult ones!
The majority of lenders assess self-employed income via either salary and dividend or the share of net profit and salary, and it sounds like you don’t fit either hence why you’re struggling. We’d really need to see a set of accounts to give you specific advice on it, but it’s certainly something lenders can consider if positioned in the right way, so long as we can evidence that the business income is sustainable going forward, and that once the goodwill has finished the business will be able to pay any salary or dividends in its’ place to the same degree.
If you send them over we’ll go through things in detail and work out the best way forward for you.
SUCCESS! After Martin made his enquiry we reviewed a full set of his accounts, and actually, his wife was also employed by the business which added more complexity. After speaking directly to an underwriter in one of the specialist lenders, the expert Pete referred them to was able to negotiate terms on a 5 year fixed deal up to 85% loan to value!
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