Mortgages for LLP Partners: Navigating Profit-Share Income
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Is a Specialist LLP Mortgage Suitable for You?
This approach is essential for any professional operating within an LLP structure where income is derived from profit share rather than a fixed salary.
Who Benefits from Specialist LLP Mortgages?
Equity partners in law firms often experience significant income fluctuations based on the settlement of large cases or the firm’s annual billing cycle. Specialist lenders understand this trajectory.
Partners in these firms often have complex remuneration packages, including base drawings, performance bonuses, and equity distributions. We work with lenders who can assess the total package.
In project-based LLPs, profits may be retained in one year and distributed heavily in the next. A specialist broker can explain this narrative to an underwriter to prevent a mortgage rejection based on a single “low” year.
Key Financial Risks of Standard Assessments
Approaching a standard high-street bank as an LLP partner often leads to frustration.
The Problem with High-Street Lenders
Many high-street lenders will simply take an average of your last two or three years’ profit share. If your income has been growing rapidly as you gain seniority in the firm, this averaging process severely undervalues your current earning capacity and restricts your borrowing power.
Some lenders confuse your monthly “drawings” (which are essentially an advance on profits) with your actual total profit share, leading to a massive underestimation of your affordability.
High-street banks often demand specific tax documents (like SA302s) that may not accurately reflect your current position if the firm’s accounting year differs from the personal tax year.
How Specialist Lenders Work
Unlocking Your True Affordability
Specialist lenders take a bespoke approach to underwriting LLP partners.
- Using the Latest Year’s Income: If your profit share has been increasing, specialist lenders will often use your most recent year’s income rather than an average, which can significantly boost your mortgage borrowing capacity.
- Understanding the Firm’s Track Record: Lenders will look at the stability and profitability of the LLP as a whole, not just your personal tax return. A partner in a top-tier, highly profitable law firm will be viewed very favourably, even if they have only recently made partner.
- Accountant’s Certificates: Instead of relying solely on HMRC documents, specialist lenders will often accept a certificate from the LLP’s managing accountant confirming your exact profit share for the current year.
Case Studies
Key Considerations
Preparing for Your Application
To successfully apply for a mortgage as an LLP partner, you need to be prepared:
- Track Record: While some lenders require two years of history as a partner, others will lend to newly appointed partners if they have a strong track record in the same industry.
- Documentation: You will typically need your last two years’ tax calculations (SA302s) and tax year overviews, plus potentially a reference from the firm’s accountant.
- Deposit: While 5% or 10% deposit mortgages are available, having a larger deposit (15%+) often opens up access to the most competitive specialist rates.
Speak to a Broadbench Specialist
You have worked hard to achieve partner status; your mortgage lender should recognise that achievement.
Speak to a Broadbench mortgage specialist today to find out exactly how much you can borrow based on your true profit-share income.
FAQs
What is an independent professional mortgage?
It’s a standard mortgage but assessed differently. Lenders consider your annualised contract rate instead of traditional income methods, helping independent professionals borrow based on true earnings. A specialist broker can help you access competitive rates.
Read our A-Z of Mortgage Terms.
Can I get a mortgage as a contractor?
Yes. While most high-street lenders struggle to assess contractor income accurately, specialist lenders can assess affordability based on your day rate or contract value. Broadbench works with lenders who understand contractor income structures, helping you borrow in line with your actual earning capacity rather than being limited by payslip-based assessments.
Does IR35 affect my mortgage application?
Yes. Your IR35 status affects how lenders assess your income. Outside IR35, specialist lenders can use your day rate to calculate affordability. Inside IR35, your employment income from your umbrella company or client payroll is used. In both cases, Broadbench will identify the lender and assessment method that gives you the most favourable outcome.
Can I get a mortgage if I earn a day rate, rather than PAYE?
Yes. Of course, there are factors that impact a contractor’s eligibility, but just by being self-employed, you should not expect to be turned down by a lender as long as they understand contractors and contracting. However, factors that would prevent anyone from securing a mortgage, such as a poor credit history or a bad payment record will apply just as much. to contractors as to employees.
Can I get a mortgage if I have only just started contracting?
Yes! As long as we can see you’ve got a history in the same line of work and in the same industry in which you are now contracting, there are lenders who accept new contractors.
Read our A-Z of Mortgage Terms.
What is a freehold?
The freeholder of a property owns it outright, including the land it’s built on. If you buy a freehold, you’re responsible for maintaining your property and land, so you’ll need to budget for these costs. Most houses are freehold but some might be leasehold – usually through shared-ownership schemes.
Why should I use a specialist Contractor broker?
By all means, go to a high street lender to satisfy your curiosity, but in most cases, the lender will have issues with how income reaches the contractor. High street lenders understand dividends, but business owners, professionals and contractors who are tax efficient and only draw down a minimum salary and dividends to meet their needs won’t look good. Specialist brokers like us go to the same lenders you see in the high street but at the head office underwriter level. This means they are speaking to people with a bigger lending mandate and a knowledge of this sector contractors, and they use the contract to define a contractor’s income.
Do I need three years of company accounts before I apply?
Lots of contractors have the misconception that they cannot get a mortgage without three years of accounts. Whereas that might have been the case several decades ago, this is certainly no longer true.
Stop Letting Algorithms Dictate Your Mortgage
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