Deciding to liquidate your company can be a challenging decision. Unfortunately, there is a lot of misinformation out there about what is and isn’t possible for directors after they liquidate a company. We’re here to ensure that you get the most accurate and up-to-date advice. In this blog, we’re looking into mortgage applications after company liquidation.
Many directors find themselves in stressful situations when liquidating. There are many reasons why a limited company may need to be closed, including retirement, financial issues or simply changing business focus.
There is no shame in liquidating a company, but it’s essential that you fulfil all your director’s duties, as this can help make the process a little easier.
Directors who fail to adhere to their legal duties may be accused of wrongful or fraudulent trading and will be held accountable for their actions. Your licensed insolvency practitioner is legally obliged to identify any issues regarding director conduct or financial records. It’s really important that you avoid personal liability by acting responsibly as a director.
If you’ve acted responsibly, you’re less likely to face major issues, though some lenders may still consider your business history. It’s crucial that you are honest about any issues as soon as you enter the liquidation process. They will be discovered eventually, and it will be easier to handle sooner rather than later. Find out more about the following liquidation types.
How does liquidation affect your life?
The ways in which liquidation affects you as a director depend on the way you have acted and whether wrongdoing is identified in your business operations. If wrongdoing is found, you may face penalties or other more serious consequences, such as legal action and director disqualification. Read our blog on life after a CVL.
Many company directors worry about their futures after liquidation, such as whether it will impact their family homes, cars, other personal assets or even their potential to get a mortgage in the future.
In most cases, a liquidation should not cause any issues with your family home or cars. However, there are instances where potential problems may arise. One of these instances is whether or not you have signed personal guarantees.
What is a personal guarantee?
A personal guarantee is essentially a security policy for the creditor. It is signed by the company director and means that if the company cannot afford to pay back the debt, the director will need to step in and pay it back.
Because guarantees are often called in when a company is already failing, the director may also be under financial strain, therefore increasing the risk of personal insolvency. Read our blog on the difference between liquidation and bankruptcy.
Can a company director get a mortgage after liquidation?
Yes, it is possible for directors to obtain a mortgage after liquidating a company, but certain factors will be taken into consideration. Remember that the liquidated company is not the only reason why a person may struggle to get a mortgage.
Mortgage lenders assess each individual’s personal financial situation. All lenders use this information to determine the risks involved with giving you a mortgage. In some instances, the lender may decide that you are a high-risk borrower if you have previously liquidated a company.
What does the mortgage lender take into account?
Your personal credit rating
In most liquidations, where the company director has not committed any wrongdoing, their credit score should not be affected. A director’s personal credit score could, however, be affected by any personal liability they have had previously or in relation to the liquidation. Some of these may also be personal guarantees.
Personal liability for company debts
Instances where you have been made personally liable for company debts will be identified and assessed. The mortgage lenders will need to understand why you were made liable.
How to improve your chances of mortgage approval
Monitor your credit score
Your credit score is a crucial factor for mortgage lenders to evaluate. It’s essential to check it periodically and ensure that it accurately reflects your personal finances. Elements such as registering to vote and managing credit limits can help to improve your score.
You should also ensure that any outstanding debts have been paid off before you make the application. This can demonstrate to the lender that you are in a more secure financial position now and are not experiencing any financial difficulties.
Evidence of a steady income
Whether you’ve started a new company or have turned to employment, potential mortgage lenders like to see evidence of a steady income. If you cannot prove your income, you may struggle to access a mortgage.
It’s important to remember that the evidence of income varies depending on your employment status. For example, self-employed individuals will require evidence over a longer period of time.
Choose your lender wisely
Former directors who are concerned about mortgage applications and acceptance may choose to work alongside a more specialist lender. These lenders may be able to provide more suitable deals for you, depending on your circumstances.
It can also be a good idea to work alongside a mortgage broker who can tailor their advice to suit you more appropriately.
There are various types of mortgages that you might be eligible for.
- Self-employed mortgage
- Joint mortgage
- Guarantor mortgage
- Bad credit mortgage
- Specialist lender mortgage
You should always speak to a mortgage specialist before you make any decisions on which one will be the best for you and your circumstances.
Carefully consider deposit size
The higher the deposit, the less money you will need to borrow. This can help to reduce your overall risk to lenders, which may encourage them to offer a mortgage to you. Putting down a higher deposit may also lead to better deals for you.
Deciding to liquidate your company can be hard, but in most cases, you should not struggle with obtaining a mortgage in the future. If you have committed wrongdoing, it’s recommended that you seek further advice.
You should always consult with a mortgage specialist before you get started on the process. They can provide accurate, professional advice on which steps to take before you start the process. We hope this blog has been helpful regarding mortgage applications after company liquidation.
Do you need company liquidation advice? Contact us to see how we can help. We provide professional, trusted and confidential advice for those who need it. We urge you not to struggle in silence. Closing your company does not need to lead to more challenges for you.
Justin Barker
I’m Justin Barker, the Managing Director at 1st Business Rescue. I have over 25 years of experience providing insolvency advice to business owners.
I understand how challenging it can be when dealing with financial difficulties within your business. It’s easy to ignore the problem and hope that it disappears, but this is often the worst thing you can do. Our dedicated team is here to provide honest, valuable advice to help UK directors deal with their personal situations in the most appropriate way.
No case or circumstance is the same, but I can guarantee that I am there to give you the best advice.
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