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    • ahouse
    • By ahouse 11th Oct 16, 2:39 PM
    • 3Posts
    • 0Thanks
    ahouse
    Mortgages for the self employed
    • #1
    • 11th Oct 16, 2:39 PM
    Mortgages for the self employed 11th Oct 16 at 2:39 PM
    Hello all,


    I have a query about applications for mortgages for the self-employed. I am employed and my partner is self-employed. We are in the process of saving for a deposit which we predict will take at least two years to save for. We recently spoke to a friend who purchased a year ago as part of a couple in the same situation (one employed and one self-employed) and were told that only a quarter of the self-employed applicant's salary was taken into account. This worried me since we are both relatively low earners so we need as much of our salaries as possible to be taken into account. I knew getting a mortgage when self-employed was pretty difficult as it was but I assumed if successful the whole declared salary would go into the calculations. There is limited advice online and no mention of the quarter of a salary so any advice or insight would be much appreciated!
Page 1
    • Brightspark87
    • By Brightspark87 11th Oct 16, 2:47 PM
    • 1,411 Posts
    • 3,621 Thanks
    Brightspark87
    • #2
    • 11th Oct 16, 2:47 PM
    • #2
    • 11th Oct 16, 2:47 PM
    Hi

    You need to speak to an independent mortgage broker. It may cost you some £££ but worth every penny to get you a mortgage. Don't go to the bank or estate agent either.
    Sealed Pot Challenge 373 - Target £300- Total £56.78
    married in 2014
    Paid off all Catalogues 10.10.2014

    Debt Free July 2016
    • kingstreet
    • By kingstreet 11th Oct 16, 3:26 PM
    • 30,023 Posts
    • 15,961 Thanks
    kingstreet
    • #3
    • 11th Oct 16, 3:26 PM
    • #3
    • 11th Oct 16, 3:26 PM
    On the whole, lenders take the latest two years' earnings from SA302s and average them.

    As with an employee, these are then multiplied by about 4.5.

    They don't take a proportion. Not for any reason I can think of.
    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.
    • hazyjo
    • By hazyjo 11th Oct 16, 3:32 PM
    • 8,231 Posts
    • 9,984 Thanks
    hazyjo
    • #4
    • 11th Oct 16, 3:32 PM
    • #4
    • 11th Oct 16, 3:32 PM
    Hi

    You need to speak to an independent mortgage broker. It may cost you some £££ but worth every penny to get you a mortgage. Don't go to the bank or estate agent either.
    Originally posted by Brightspark87
    They often don't cost - they take their commission from the mortgage providers.


    If you use one linked to an EA, yes, they are likely to charge (and, as above, best to avoid them anyway).


    Jx
    2016 wins: ESPA gift set; jumper; lip balm x 2; kitchen scales; perfume; shoes; theatre tickets; Champagne; books; After Eights; Diet Coke; Molton Brown duo; fish slice; travel set
    • hazyjo
    • By hazyjo 11th Oct 16, 3:35 PM
    • 8,231 Posts
    • 9,984 Thanks
    hazyjo
    • #5
    • 11th Oct 16, 3:35 PM
    • #5
    • 11th Oct 16, 3:35 PM
    Check out Step 3, point 2.


    http://www.moneysavingexpert.com/mortgages/best-mortgages-cashback
    2016 wins: ESPA gift set; jumper; lip balm x 2; kitchen scales; perfume; shoes; theatre tickets; Champagne; books; After Eights; Diet Coke; Molton Brown duo; fish slice; travel set
    • tiger eyes
    • By tiger eyes 11th Oct 16, 3:35 PM
    • 922 Posts
    • 2,330 Thanks
    tiger eyes
    • #6
    • 11th Oct 16, 3:35 PM
    • #6
    • 11th Oct 16, 3:35 PM
    I had three full years' SA302s and they offered me a bit more than 4.5 times my income. No problems whatsoever.
    • neo2020
    • By neo2020 11th Oct 16, 4:03 PM
    • 46 Posts
    • 19 Thanks
    neo2020
    • #7
    • 11th Oct 16, 4:03 PM
    • #7
    • 11th Oct 16, 4:03 PM
    It really depends on your circumstances but this issue about them taking 25% of your income is nonsense.

    My wife and I are both self-employed and in the process of a mortgage application.

    I strongly recommend you contact an independent mortgage broker, whether paid or not, and ask them if they have experience of dealing with mortgages for self-employed people.

    The value of a mortgage broker is they can help you apply to a lender that is actually going to lend to you based on your particular criteria (for example, my wife and I needed a lender that would lend based on last year's income figures, rather than a 2 or 3 year average) - a broker knows which lenders will be willing to lend to you and which will not.
    • kingstreet
    • By kingstreet 11th Oct 16, 4:19 PM
    • 30,023 Posts
    • 15,961 Thanks
    kingstreet
    • #8
    • 11th Oct 16, 4:19 PM
    • #8
    • 11th Oct 16, 4:19 PM
    In no particular order, there are lenders who will;-

    lend on one year's trading
    lend on latest year's figures when an average won't work
    lend based on company profits, not director's remuneration and dividends (SA302s)
    lend based on an accountant's certificate, not accounts or SA302s
    lend based on SA302s, not accounts or accountant's certificate
    lend based on accounts, not accountant's certificate or SA302s
    lend based on gross contract value for "contractors."

    Finding the right broker will result in you getting the best deal for your individual circumstances and the right mortgage from the first application.
    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.
    • Brightspark87
    • By Brightspark87 11th Oct 16, 4:39 PM
    • 1,411 Posts
    • 3,621 Thanks
    Brightspark87
    • #9
    • 11th Oct 16, 4:39 PM
    • #9
    • 11th Oct 16, 4:39 PM
    Just to say with fees - I had to pay a fee up front and then if there was shortfall for my brokers costs from the commission payable. IE he wanted a total of £750 of which £99 was paid upfront.
    Sealed Pot Challenge 373 - Target £300- Total £56.78
    married in 2014
    Paid off all Catalogues 10.10.2014

    Debt Free July 2016
    • Thrugelmir
    • By Thrugelmir 11th Oct 16, 4:56 PM
    • 51,279 Posts
    • 43,081 Thanks
    Thrugelmir
    What's the nature of your friends self employment?
    “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’.”
    • kingstreet
    • By kingstreet 11th Oct 16, 4:57 PM
    • 30,023 Posts
    • 15,961 Thanks
    kingstreet
    FWIW our fee is £250, if you don't buy from one of our builders. Nil, if you do.

    Procuration fees are typically 0.32% (paid to us) of the amount borrowed, so on a £150k mortgage we would earn a total of £730.

    Being in the West Mids, we do a lot of sub-£150k cases so we mostly earn less than £700 a case.
    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.
    • ahouse
    • By ahouse 11th Oct 16, 5:22 PM
    • 3 Posts
    • 0 Thanks
    ahouse
    What's the nature of your friends self employment?
    Originally posted by Thrugelmir

    The friend and my partner are both musicians, they teach 1 to 1 lessons and perform.
    • Phirefly
    • By Phirefly 12th Oct 16, 6:31 AM
    • 1,584 Posts
    • 1,925 Thanks
    Phirefly
    Myself and my husband are SE and I'm currently on extended maternity leave. Just chipping in to agree with those who said the 25% figure is nonsense. Perhaps that was their lender's criteria but as others have said, there's no hard and fast rule across lenders.

    A fellow company director friend recommended a local mortgage broker to us and she was excellent. Given long enough, we could probably have saved ourselves the £499 in fees and eventually found the product ourselves as even though our circumstances and income streams are somewhat unique and unconventional, we were pleasantly surprised at the sheer number of lenders we were able to select from. But for us, speed was of the essence. The broker was able to refine the initial list of lenders purely through her experience and knowledge. When several lenders appeared to offer comparable rates, she was able to recommend the one which would most likely approve us, so we wouldn't waste time. Using the broker saved us a great deal of time, effort and uncertainty.

    Don't be afraid to use a broker who charges a fee. Different brokers have different specialisms and we thought in the sceme of things, the long term saving we would make from finding the best possible product would far outweigh her fee. It's easy to square it when you are self employed as it pulls into sharp focus what your own time is worth and when it makes sense to pay a professional to save you tat time.
    • glasgowdan
    • By glasgowdan 12th Oct 16, 6:50 AM
    • 1,464 Posts
    • 1,559 Thanks
    glasgowdan
    Our mortgage was based on my wife's salary and an average of my last 3years net profit as sole trader self employed.
    • Mortgage Moog
    • By Mortgage Moog 12th Oct 16, 8:47 AM
    • 142 Posts
    • 30 Thanks
    Mortgage Moog
    "The value of a mortgage broker is they can help you apply to a lender that is actually going to lend to you based on your particular criteria"

    I wouldn't put too much into that but of course it depends on the broker. I am self employed and went to a broker who said they had specialist knowledge and could put me in touch with special companies that wouldn't mind me being self employed.

    I spent months of saving the deposit and being told to wait, wait, wait for my appointment with the broker where they would reveal these magical companies that could help me. The day came, I went into the office and he said....try Nationwide. I did and they offered me 22k.

    I went away, applied directly to a high street bank and got offered an amount I could actually buy somewhere with. I did it all myself in the end. I based the bank I went to on the fact that they'd given me credit cards in the past with high limits. Quite a basic strategy I know but it worked and I got a great deal, far better and cheaper than anything the broker had offered me.
    • neo2020
    • By neo2020 12th Oct 16, 1:42 PM
    • 46 Posts
    • 19 Thanks
    neo2020
    "The value of a mortgage broker is they can help you apply to a lender that is actually going to lend to you based on your particular criteria"

    I wouldn't put too much into that but of course it depends on the broker. I am self employed and went to a broker who said they had specialist knowledge and could put me in touch with special companies that wouldn't mind me being self employed.

    I spent months of saving the deposit and being told to wait, wait, wait for my appointment with the broker where they would reveal these magical companies that could help me. The day came, I went into the office and he said....try Nationwide. I did and they offered me 22k.

    I went away, applied directly to a high street bank and got offered an amount I could actually buy somewhere with. I did it all myself in the end. I based the bank I went to on the fact that they'd given me credit cards in the past with high limits. Quite a basic strategy I know but it worked and I got a great deal, far better and cheaper than anything the broker had offered me.
    Originally posted by Mortgage Moog
    I have absolutely no doubt that there are crap mortgage brokers out there. In fact, the first one I contacted didn't seem interested, had me spend an hour filling out his affordability sheet and then never got back to me.

    Without knowing the exact details of your situation, there could have been many reasons why you had no trouble doing things yourself:
    - your situation is straightforward and any lender would have been happy to lend to you
    - you got lucky and picked a lender that matched up with your criteria

    I contacted 3-4 lenders myself before going to the broker, all of which were unwilling to lend the amount we needed. In the end we applied to Santander via the broker, which was not one of the banks I had originally contacted, because the broker specifically knew that they would lend the amount we needed taking into account the details of our particular case.

    If you are in full-time employment, have great credit, a large deposit and way more income than you need for the amount you're borrowing, you probably don't need a broker.

    If your situation is a bit more complicated, you might need a good broker.
    • Thrugelmir
    • By Thrugelmir 12th Oct 16, 6:00 PM
    • 51,279 Posts
    • 43,081 Thanks
    Thrugelmir
    The friend and my partner are both musicians, they teach 1 to 1 lessons and perform.
    Originally posted by ahouse
    May explain the lenders reluctance to lend in this particular instance. Once the business had been reviewed in detail.
    “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’.”
    • ahouse
    • By ahouse 18th Oct 16, 3:27 PM
    • 3 Posts
    • 0 Thanks
    ahouse
    Thanks so much everyone for your advice! Although we are a few years off reaching the planned deposit (assuming that will actually be enough in a few years time!) its good to know the options available. As with many things it seems like we will have to explore every avenue, using a mortgage broker sounds like a good idea without ruling out doing it ourselves either. And it is certainly reassuring to know that the 25% salary is not some secret universal rule for the SE we had missed!
    • sheff6107
    • By sheff6107 18th Oct 16, 5:28 PM
    • 187 Posts
    • 134 Thanks
    sheff6107
    Just avoid Nationwide if you are self employed.
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