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Mortgages

Can I use a Bounce Back Loan as a property deposit?

For property investments, bounceback loans are a problem in regards to deposits is that lenders don’t want you to have zero stakes.

In regards affordability, the company is a separate entity to you, and they are looking at salary and dividend most likely. I’m almost all circumstances I pass on Tax Calculations and Tax Year Overviews for you personally to prove limited company director income, so the lender only sees what you declared as income to HMRC and what you paid personal income tax on. The company accounts are rarely required (unless you want to use retained profit or other niche reasons).

If your business took a bounceback loan that shouldn’t affect things materially, however lenders are beginning to look more closely as the sustainability of the business and there is likely to be more scrutiny on this basis. They are looking at whether the business is viable long term though so if a drop in revenue was temporary this should still be OK. If its thought that the business (a city centre cafe for instance) was not going to be viable long term then they may decide to reduce the income amount they will consider. We are really only just starting to see the feedback across lenders on this and as I do mostly BTL mortgages, I probably see this less than other mainstream brokers.

So it’s clear now that any application where the deposit is being funded by a bounceback loan won’t be accepted. You would need to take the money based on revenue anyway, so most new property companies are not going to have a useful revenue anyway, and deposits from other limited companies, whilst technically feasible with a small handful of lenders, will attract more scrutiny to look for those loans etc.

Indeed even payment holidays are being factored into decisions going forward with some lenders which is a concern.

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