Can a director of a liquidated company get a mortgage in the UK?

Running a business can be tough. You work hard, plan well, yet there's no avoiding the obstacles that will arise. If your company has gone into liquidation, you’re probably wondering, “Can a director of a liquidated company get a mortgage?”

The good news is yes, you can. However, it may be harder, and lenders are likely to ask more questions. Here we discuss how liquidation affects your chances and what you can do to improve them.

What is company liquidation?

Now, before we delve deeper into mortgages, let’s take a look at the types of liquidation:

Voluntary liquidation

This occurs when you choose to close the business because it can no longer afford its debts.

Compulsory liquidation 

A court orders the company to close. The business assets are sold and used to pay off creditors.

Administration

This is a plan to save the business. It gives the company time to recover and the ability to avoid liquidation.

Regardless of the type of liquidation, it can affect more than just your business. It could also have an impact on your personal finances.

Can you still get a mortgage?

Yes, you can. But it may be more difficult.

Lenders will often view liquidation as a sign of risk. So can a director of a liquidated company get a mortgage? Some banks may say no, while others will take a deeper look. Specialist lenders will be more open to these kinds of cases.

Are directors personally liable for company debts

In most cases, no. As a company director, your liability is limited, meaning the business is a completely separate entity. But there are some exceptions:

If you signed personal guarantees, you may have to repay the debt yourself.

If you were found to have been involved in wrongful trading, such as continuing to trade while the company was insolvent, you may be held responsible.

In both of these cases, your personal credit could be affected.

What will lenders want to see

To help a director of a liquidated company get a mortgage, there are a few key things lenders will be looking out for:

Time since liquidation

Some lenders need two to six years to pass after liquidation. Others may offer a mortgage sooner, but these will likely be followed with higher interest rates.

Your deposit

Many lenders will view liquidation as a red flag and in turn may categorise you as a high-risk applicant. A bigger deposit shows lenders you’re serious, and offsets some of the risk for the lender. You may need 20-25% of the home’s value to reduce this risk.

Your income 

Can you afford the mortgage? You will need to show proof of steady income, either from a job or self-employment. Most lenders will ask for three to twelve months of financial records.

Your conduct

Some lenders will carry out background checks. To help a director of a liquidated company get a mortgage, they’ll want to know how the liquidation was handled. Being honest and clear in your application will help build trust.

Will liquidation hurt your credit score?

It depends on your role and the setup of your business.

If you ran a limited company, the liquidation won’t usually show up on your personal credit report.

But if you signed personal guarantees, and failed to repay, it is likely your credit will take a hit.

If you operated as a sole trader, your business debts are your personal debts. So, yes, it will affect your credit.

In addition, there’s also an indirect impact of your company liquidation on your individual financial status.

A liquidated company’s director has a higher risk of financial instability from the perspective of a lender. Your income/salary will be reduced post-liquidation which means that your expected ability to repay the loan on time will also decrease.

Specialist lenders can help

Although, you may not get much luck with some of the high-street banks, specialist lenders are much more flexible.

They often work with people in tricky situations, such as helping a director of a liquidated company get a mortgage despite the challenges. However, these lenders are likely to charge higher interest rates and their fees are likely to be greater.

It’s important you understand the full extent of the costs before you decide to agree to anything.

Get expert advice

So, can a director of a liquidated company get a mortgage? Yes, but you’ll need to prepare.

If possible, save a bigger deposit, ensure your income is in a good place, and be honest in your application. Most of all, make sure you work with the right lender or advisor.

At Regulated Advice, we help people who find themselves in a similar situation to yours. Our mortgage experts understand liquidation cases. We’ll guide you through the process and help you find the right deal.

You’re not out of options, just on a new path.

Let Regulated Advice match you with a mortgage advisor for expert advice.