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    • feeta
    • By feeta 7th Oct 16, 10:58 PM
    • 50Posts
    • 23Thanks
    feeta
    Building My Own House - Income
    • #1
    • 7th Oct 16, 10:58 PM
    Building My Own House - Income 7th Oct 16 at 10:58 PM
    Hi all,

    My family and I are about to embark on the long journey of building our own home.

    One question I had was about the finance side of things. I'm going to be doing the vast amount of work myself, which means that I'll need to leave my current full-time job. My wife will carry on working full-time. (this isn't a question about building it myself vs getting builders in - I'm capable of doing it and I would earn less in my current job, than I'd need to pay out to even one labourer - Meaning it makes financial sense for me to take on the work)

    Our mortgage adviser has done the research and we are able to get the self-build mortgage we need to build the house, on our current wages. This is fine as I won't leave work until after they've done the checks and the mortgage is in place.

    My worry is that once I leave work and spend my time on the build, I'm not going to be earning any money (but saving a lot of money compared to paying others to build it). When we've finished the house build in a couple of years time, and we need to arrange for a standard mortgage (rather than the more expensive self-build mortgage), they'll look at the paperwork which will show my wife as full-time, but me as unemployed, and I'm worried they won't offer the mortgage we'd need (once the build is finished I'll go back to working full-time)

    Now, my question is this...Am I able to 'pay myself' to build the house? I realise that I won't actually be making any money, but on paper it would show me as having an income...but is it legal?

    My idea is that I set up as self-employed as a sole trader (or ltd company if I need to) becoming the project manager or main contractor for the build, and then bill my wife and I, as the clients, for my services. The money would come from the self-build mortgage (and would effectively circle around, as we'd be paying my business, which I'd then draw down wages from, which would then be used to pay the mortgage along with my wife's income too)

    I realise that I'd have to budget for tax and NI and this would slightly increase the cost of the build, but I'm not sure how else to work it so that we can actually get a standard mortgage at the end of the project.

    It's worth noting that I'll also be doing some other self-employed work in the evenings alongside the build - so I will have a little *real* income, but nowhere near as much as I have now, and nothing regular.

    Any help would be very much appreciated. I've done lots of searching online but can't find any examples of this being done before.

    Thank you in advance :-)
Page 1
    • kingstreet
    • By kingstreet 8th Oct 16, 9:00 AM
    • 30,030 Posts
    • 15,965 Thanks
    kingstreet
    • #2
    • 8th Oct 16, 9:00 AM
    • #2
    • 8th Oct 16, 9:00 AM
    Why don't you just get a job offer and start date when you finish, then apply to remortgage?
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
    • feeta
    • By feeta 8th Oct 16, 10:39 PM
    • 50 Posts
    • 23 Thanks
    feeta
    • #3
    • 8th Oct 16, 10:39 PM
    • #3
    • 8th Oct 16, 10:39 PM
    Why don't you just get a job offer and start date when you finish, then apply to remortgage?
    Originally posted by kingstreet
    My only worry would be that if I was going to pick up more self-employed work once the build is finished (not contracted employment) then I'd have nothing to show the mortgage company.

    If I was self-employed with no records showing previous income, how would they work out how much we can borrow?

    Thank you
    • Thrugelmir
    • By Thrugelmir 8th Oct 16, 10:56 PM
    • 51,313 Posts
    • 43,142 Thanks
    Thrugelmir
    • #4
    • 8th Oct 16, 10:56 PM
    • #4
    • 8th Oct 16, 10:56 PM
    If I was self-employed with no records showing previous income, how would they work out how much we can borrow?
    Originally posted by feeta
    You'd need to establish your business before applying. Lenders base their decision on the facts at the time of application.
    “A man is rich who lives upon what he has. A man is poor who lives upon what is coming. A prudent man lives within his income, and saves against ‘a rainy day’.”
    • feeta
    • By feeta 8th Oct 16, 10:59 PM
    • 50 Posts
    • 23 Thanks
    feeta
    • #5
    • 8th Oct 16, 10:59 PM
    • #5
    • 8th Oct 16, 10:59 PM
    You'd need to establish your business before applying. Lenders base their decision on the facts at the time of application.
    Originally posted by Thrugelmir
    That's what I was worried about (and the reason for the original post) If I show that I'm earning (even if it is by building a house for my family) then it will surely help?

    We could obviously stay on the Lender's self-build mortgage but the interest is far far higher than a standard mortgage - hence why I'd want to swap away from it as soon as the house is complete.
    • somethingcorporate
    • By somethingcorporate 9th Oct 16, 12:06 AM
    • 8,697 Posts
    • 8,426 Thanks
    somethingcorporate
    • #6
    • 9th Oct 16, 12:06 AM
    • #6
    • 9th Oct 16, 12:06 AM
    As part of the mortgage application you will be asked if there is likely to be any change to your income that you know about. If you declare your plan you may get refused for finance. If you don't declare your plan you will be committing mortgage fraud.

    Have you considered this?
    Thinking critically since 1996....
    • feeta
    • By feeta 13th Oct 16, 10:35 AM
    • 50 Posts
    • 23 Thanks
    feeta
    • #7
    • 13th Oct 16, 10:35 AM
    • #7
    • 13th Oct 16, 10:35 AM
    There must be a way people do this though?

    Plenty of builders take time off their work to build their own properties. They must (on paper) still be working - even if it is on their own home?
    • Cazza
    • By Cazza 13th Oct 16, 10:52 AM
    • 1,117 Posts
    • 940 Thanks
    Cazza
    • #8
    • 13th Oct 16, 10:52 AM
    • #8
    • 13th Oct 16, 10:52 AM
    There must be a way people do this though?

    Plenty of builders take time off their work to build their own properties. They must (on paper) still be working - even if it is on their own home?
    Originally posted by feeta


    We have done / are doing an extensive refurb on our own property, so in terms of how people manage to do it, our situation is comparable.


    DH was self employed as a builder for 5 years before we bought our property and had 5 years of tax returns to support this. We lived there for 2 years before starting work which has taken 3 years to date and is expected to take a further year. DH takes blocks of time out of his self employed work to carry out work to our property, before going back to work on other peoples houses - partly to ensure his business doesn't fail and partly because we need the cash from his work to carry on with our property. The longest block was 3 months, usually it's a week or two. I am (on paper) the high wage earner and could just about afford our current mortgage on my own, if we needed to remortgage.
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