Best provider of mortgage to self employed

Hello,

My husband and i are self-employed and are applying to BOI for a buy-to-let mortgage together.

As part of the banks assessment we have supplied 3 years company accounts. In each of the 3 years, our company generates lots of income and rather than pay tax on the company's profit we redistribute that income in salaries to the company's 3 employees, so the company over the last 3 years hasn't made profit. This is tax efficient and I understand that lots of companies do this.

However BOI has just advised that their underwriters have turned down our mortgage application because regardless of our personal salaries, which are high, our company that provides the salaries hasn't generated profit over the last 3 years, and so regardless of the company's high income levels over the last 3 years, because the company has not retained profits each year, the bank has just rejected our mortgage application.

If anyone, has advice here super. Thank you.
Is this a BOI approach or do all banks take a similar approach? I am happy to reapply to another bank if needed.

Should I try a mortgage broker or is this pointless?
We have just gone sale agreed, so am devastated.

Thanks in advance for any advice you can give me.

Cheers
Fiona

fionawalsh@outl said:

rather than pay tax on the company's profit we redistribute that income in salaries to the company's 3 employees, so the company over the last 3 years hasn't made profit.

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This sounds a bit extreme. Did you decide on this on foot of professional advice?

fionawalsh@outl said:

This is tax efficient

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It's not really, assuming you're in Ireland and liable for 12.5% CT.

fionawalsh@outl said:

and I understand that lots of companies do this.

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I don't know any who do.

Who is applying for the mortgage?

The company or yourself and your husband?

fionawalsh@outl said:

the company over the last 3 years hasn't made profit. This is tax efficient and I understand that lots of companies do this.

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I would agree with you that this is tax efficient and is discussed at length here


I don't understand the bank's attitude.

I presume that you and your husband are two of the three employees who get the salary?

If you made €300k and took a salary of €100k each, then that is no worse that if you had left €150k in the company and taken €50k each.

Brendan

A bank is going to be innately suspicious of the future prospects of any trading company that empties its purse every year to top up directors salaries.

They may also fear that there is a legitimate expectation on the part of one or more of the directors to receive the same level of remuneration package each year even if its profitability weakens or it incurs losses.

The OP's situation seems tailormade for a broker.