Can I get a mortgage with an LLP?

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Can I get a mortgage with an LLP?

Can I get a mortgage with an LLP?

Paul Holland explains how mortgages work for people in a Limited Liability Partnership.

What is a Limited Liability Partnership or LLP?

An LLP is quite a complicated structure, but essentially it just allows a traditional partnership. When you watch a TV series about a law firm and somebody is made partner – it’s very similar to that setup.

It’s commonly used by lawyers, architects, doctors and dental practices. These are professional businesses where multiple people are running that firm for the purpose of profits. Essentially, it’s just a tax wrapper, similar to a limited company. But there are differences in how that construct is taxed.

Can you get a mortgage if you are in an LLP?

Yes. As long as you’re earning money, generally speaking, you can put it towards affordability on top of your deposit and obtain a mortgage. It can actually be relatively straightforward for someone in an LLP in comparison to limited companies, sole traders, and other ways you could be self-employed – because ultimately this is a self-employed construct.

Can a newly established LLP apply for a mortgage? Can I get a mortgage if I’ve only been in an LLP for a year?

This is a key question for anyone who is self-employed: ‘how many years of accounts do I need?’ People often think they need three years’ worth of sole trader accounts or limited company accounts.

But in fact, LLPs are a rare one where you could actually get a mortgage if you only set up an LLP last month. Generally speaking, you’re already in that professional realm. You will have been in the industry for a certain amount of time. You don’t get people coming straight out of university and setting up LLPs.

Generally, these are people that have been trading for a long time before setting up a partnership. They will have been employed or even self-employed before that, and so lenders can assess their income based on historic measures.

If you’ve been in an LLP for any amount of time, don’t let it stop you from getting the ball rolling with anything mortgage-related. Have a chat with us – we can explain where you stand based on your circumstances.

What documentation will lenders want to see as an LLP?

You’re always going to need ID, bank statements and proof of the source of your deposit. From a document perspective, you’ll be viewed similarly to a sole trader.

You’ll get paid a personal income from that LLP entity. It will derive from things like salary, maybe bonuses and profits, and that’s all going to show on your SA302s – also known as tax calculations.

Lenders will probably ask for two years’ worth of those, along with the corresponding tax year overview documents, which can all be obtained from the HMRC portal or from your accountant.

A few lenders might go down a slightly different route and ask for a reference from the people that deal with your company finances. They may ask for more detail on the setup of the actual partnership itself. But generally speaking, you will be treated quite similarly to a sole trader.

How is mortgage affordability worked out for an LLP? Is there a cap on how much you can borrow as an LLP? How much deposit is needed?

You’re going to need at least a 5% deposit. The income from the LLP portion of the application is going to show on your tax calculations, and some lenders will look at that and take the latest year. Others will average it out between the latest two years.

Then, we can use that figure along with any other income from other applicants on the mortgage. That’s going to go into the affordability calculator along with all of your commitments and expenditure. The lender will then apply a multiple to that total and that will be the maximum loan amount.

You won’t get a different multiple because you’re an LLP – it’s just based on the lender you approach. That’s why it’s important to factor all this information in and assess the circumstances from top to bottom, to decide where to place you with the most appropriate lender.

What happens if I have bad credit as an LLP partner? Can an LLP with company debt apply for a mortgage?

Company debt isn’t really an issue when an individual is applying for a mortgage. Most companies are going to have some debt. Hopefully, that’s being managed appropriately. If it’s being managed terribly, there’s a good chance it would filter through to your personal situation anyway.

It’s your personal debts and your conduct on those agreements that will have a direct impact on your mortgage application. Your level of impaired credit will influence the mortgage rate you can get.

Securing the best rate for you is really going to depend on you having as good a credit file as you possibly can. But it’s rare that we can’t secure anything at all based on someone’s poor credit. It would normally just mean you take a hit on the rate, compared to the high street rates you see out there.

Can I get a Buy to Let mortgage as an LLP?

Most mortgage queries tend to be about income. But with Buy to Let, affordability and criteria are predominantly based on the rental potential of that property. So your income situation isn’t as important as when you’re buying your own home.

If you’re looking to invest in property and you’re in an LLP situation, don’t be too concerned about that. Again, have a chat – there are likely to be some good options available to you.

How does remortgaging work if you are an LLP?

Any differences when remortgaging your current deal will only come about if your situation has changed.

Let’s say you were employed and now you’re an LLP. You will now need to provide completely different evidence and documents. But in isolation, the remortgaging process itself won’t be much different from a purchase application or a previous remortgage.

What else can influence my eligibility to obtain a mortgage as an LLP?

This generally applies to everyone – whether you’re in an LLP, a limited company, you’re a sole trader, are employed, a contractor or anything else. The biggest factors in eligibility for a mortgage will be four things: your credit, your conduct, your affordability and your deposit.

To have the best chance, you need to keep up to date with all your credit agreements and make sure that your credit score is as good as it can be. We need to ensure that the affordability matches the loan amount you’re looking for, and that you’ve got a deposit of some sort – the bigger, the better.

Those four things have the biggest impact. If you come to me with any other quirks, with those four things intact, we can work with it.

If you’re in a big partnership, there’s going to be little you can do to influence the choices and decisions it makes. You just do what you do there and make sure that your personal situation is in the best position possible.

How can a mortgage broker help me with a mortgage as an LLP?

LLPs in general can come across as quite confusing for a lot of people. How an LLP works, or what the benefits are of an LLP versus a limited company or a sole trader, are quite complicated to explain for most people.

But generally speaking, the mortgage situation isn’t any more complex, as long as you know what you’re doing. People with an LLP background are generally just wondering whether they need a year’s worth of accounts, or how bad credit affects them.

Speaking to a broker is going to answer all those questions straight away, and put you in the best position to achieve your goals as soon as you can. It’s much easier than trying to find the answers on Google. Speaking to a broker – sooner rather than later – is always the best route here.