Can / should he get a mortgage?

smartpicture

He has 3 years of accounts showing he earned 15k or less (net). However, in the most recent year, he is expecting to make around 25k (net). He also does some cash-in-hand jobs, I don't know how much they amount to. He plans to get an interest only mortgage which he says will cost around £350 per month, which he reckons he can easily afford.

_Andy_

smartpicture wrote: »

He has 3 years of accounts showing he earned 15k or less (net). However, in the most recent year, he is expecting to make around 25k (net). He also does some cash-in-hand jobs, I don't know how much they amount to. He plans to get an interest only mortgage which he says will cost around £350 per month, which he reckons he can easily afford.

How would he be intending to pay the mortgage capital back?

markelock

I'd keep the £30k in the bank. in theory, say 5% appreciation on the capital, with a further 5% reduction in house prices, means that he'll save more in the long run (say 12 months), and be able to either earn more, or spend less on the house type he is currently looking for.

koexelek

mic200202 wrote: »

The self certification option is commonly used by self employed when thier current earnings are not reflected in the latest accounts available.There can be many reasons why this may happen. He needs to self declare his current (net profit) earnings to the lender. I have, howvever,seen many self employed where they completely misunderstand the gross / net earnings requirements,and because employed people use their gross earnings assume they can do the same. You pal has to declare what his current net profit is.It is quite a different case if he is just making up an income with no basis in fact, irrespect of affordability.

Yes, a lot of self employed people think their turnover/gross profit is their income.
It also amazes me how some self employed people have not got a clue what they earn.
Even crazier, some self employed people I have come across don't even put any monry aside for tax :eek:

They end up taking out loans and remortgages to pay it.

smartpicture

_Andy_ wrote: »

How would he be intending to pay the mortgage capital back?

He just assumes that his business will take off and he will have the funds at some future date - plus house price rises will mean he makes money regardless. Yes, I know!! Some people just dont worry about the future in the way that I do - they assume that things will work out okay.

Oh, and his other argument is, if it all goes wrong, if he doesn't have any assets (other than the house), then they can't get blood out of of a stone so what is there to worry about? He says, only people with assets (like me) have to worry about stuff like that, and then we're letting our assets control our lives - whereas he's just taking a punt, if it goes wrong, nothing lost, if it works, he'll be a millionaire this time next year, Rodney :rolleyes:

markelock

except he'll lose his business if he has no cash flow and no way to borrow money, if it all goes wrong.

neverdespairgirl

smartpicture wrote: »

That's pretty much what I thought, so I'm worried for him. Are mortgage companies known to take action on this sort of fraud?

I imagine they are getting a LOT keener on it now.

mitchaa

smartpicture wrote: »

He has 3 years of accounts showing he earned 15k or less (net). However, in the most recent year, he is expecting to make around 25k (net). He also does some cash-in-hand jobs, I don't know how much they amount to. He plans to get an interest only mortgage which he says will cost around £350 per month, which he reckons he can easily afford.

I would suspect a £90k IO mortgage at a self cert rate (Even with a 25% deposit) will cost him a lot more than £350??

koexelek

mitchaa wrote: »

I would suspect a £90k IO mortgage at a self cert rate (Even with a 25% deposit) will cost him a lot more than £350??

Yes, that works out at 4.6%.

He's do well to get 7% on something like that

smartpicture

koexelek wrote: »

Yes, that works out at 4.6%.

He's do well to get 7% on something like that

That's interesting, thanks. Anyway, he's got an appointment with a mortgage broker this afternoon, so that may well put the kibosh on things.