Joint Mortgage: Employed & Self Employed

jagakajay

Hi,

my partner and I are currently saving for a deposit. We hope to have around 35k by the end of the year. We are hoping to buy a property for circa 250k.

Currently my partner earns cirka 20k and I earn circa 60k, so we think getting a normal mortage should not be a problem (ven though we both got in a little trouble over 4 years ago). However, my partner is going Self employed in April this year (to allow us to save more of a deposit).

Whilst my partner will be working in the same industry she does currently (and should be doubling her gross income) I'm wondering what type of mortgage may be available to us. I know that some lenders may have higher mutliples, so I may be able to get the mortgage on my salary alone, but It would be good if we could get my partners income included as well, without going down a Full Self Cert mortgage route.

Does anyone have any ideas, or has anyone out there had a similar situations?

Debt_Free_Chick

With a "perfect" credit record, you should be able to get a (joint) mortgage on your salary alone, at 4x income so around £240k. In this case, your partner's income is immaterial.

However, you mention "a little trouble" about 4 years ago - what do you mean? A CCJ will see your joint application being much more closely scrutinised and the best deals won't be available to you. You may even find that you need a deposit of 20, 25, 30% or more to get the best deals.

More information on "the little trouble" is needed, in the first instance. In the meantime, save as much as you can.

It's interesting that your partner is going to earn more being self-employed. This is very difficult to achieve so perhaps you could elaborate on that too.

I assume you currently have no debt? If you do, it would probably pay you to eliminate the debt, even if that means deferring your house purchase. Lenders are going to be cautious for a long, long time yet.

jagakajay

1 CCJ in 2003 (satisfied and off record in Decemeber) 2 defaults in 2004 (bad break up). Debt will pretty much be gone (hopefully when we wish to apply, but if not then this will equate to about 400 p/m).
As for partner going self employed, then makes sense really. She is a hairdresser that is Salaried and not on Commission. Having an established client base and by renting a chair in her existing salon 4 days per week will provide an income purely for her and not her employers. Based upon figures taken from the last 6 months it seems that after paying all expenditure (rent/equipment/colours etc) plus paying 20% into an account for the tax man she should be able to draw 2k p/month (basically double her net wage now).

seanathome

In my recent experience lenders are being VERY cautious.

Both my wife and I are self employed. Joint income £48k. Had a Halifax mortgage for 3 years. We increased our repayments about 9 months ago from £800 per month to £1600pm as business has been good and we have a comfortable amount of savings. We have no credit card debt.

We approached the Halifax for a further advance of £44k but were refused. That was a little surprising.

We currently have £99k outstanding on our mortgage, so what was really surprising was the nice man from the Halifax saying that, using their current mortgage criteria, we wouldn't even be able to borrow £99k. To soften the blow a little he did say that we have basically fallen victim to the credit crunch.

jagakajay

This is what I was worried about. The current climate is not lending itself nicley to such matters. It seems unless somethign drastic happens we are going to have to rely on my income so that we can at least get a decent (ish) LTV and income multiple.

Shame Mr Halifax could not help your, although when I was looking at their products the LTV is different for remortgage than for FTB's (seems to be the same for most lenders).

Debt_Free_Chick

jagakajay wrote: »

1 CCJ in 2003 (satisfied and off record in Decemeber)

December 2009? I guess so

2 defaults in 2004 (bad break up).

In 2010 then

Debt will pretty much be gone (hopefully when we wish to apply, but if not then this will equate to about 400 p/m).

Good news for you

As for partner going self employed, then makes sense really. She is a hairdresser that is Salaried and not on Commission. Having an established client base and by renting a chair in her existing salon 4 days per week will provide an income purely for her and not her employers. Based upon figures taken from the last 6 months it seems that after paying all expenditure (rent/equipment/colours etc) plus paying 20% into an account for the tax man she should be able to draw 2k p/month (basically double her net wage now).

Examine the contract with the owner very carefully although my hairdresser did this 2 years go and has not looked back since She now works 3 days a week and earns as much as she did working 5 days a week!!

Don't forget the NI on profit, but if she's putting 20% of earnings, ignoring her personal allowance, then she'll be fine.

I think that with debt reduction - or dare I say, elimination - coupled with savage saving, you'll be fine come 2010. And who knows what the lending climate will be like then? Certainly not back to the days of 2005/2006 but hopefully better than now.

jagakajay

Debt Free Chick - Thanks for the reply. CCJ will be erased in Dec 09, and defaults off record in Apr 10 and Jul 10. We were hoping to only have to rent for another year, so looking at moving out this time next year. Yep, 20% was based upon gross earnings...shocking - seems like i'm in the wrong industry!

Anyway, as we are unable to see what the future holds with the lenders, I guess we'll have to wait and see. I would however be interested to know what kind of mortgage may be availabl for joint applications where one applicant is self employed and the other is salaried. Reading other posts it seems that Self Cert is on the decline, and even if available offers up to 70% LTV plus higher interest rates. Other mortgages are available but seem to require a couple of years accounts (which will not be possible given my partners April start date). I guess what I'm trying to establish is if one us us is self employed, does this mean that our options are to get a joint Self Cert mortgage, or does it all has to be based upon my salary? Ideally a nice lender would take my salary and include some of my partners earnings based upon banks statements for 6 months or so....am I Dreaming - lol????

Conrad

No, you cant have a mix and match mortgage, where part is based on self cert and the remainder full status.

You can have a joint full status mortgage as long as your income covers it all, although a couple of lenders will take just 6 months self employed trading history and lend therefore on her income as well as yours.

One of these lends up to 85%, but always subject to full assesment and credit score.

The adverse credit could be a big issue. You state it will be erased, but I'm not sure about that. Lenders have thier own internal systems, which may well deem you to be too high risk, but hopefuly not.

Debt_Free_Chick

jagakajay wrote: »

Debt Free Chick - Thanks for the reply. CCJ will be erased in Dec 09, and defaults off record in Apr 10 and Jul 10. We were hoping to only have to rent for another year, so looking at moving out this time next year.

No way, sorry. If you have a CCJ on the record until July 2010, then you need to leave at least six months after that so .... you should not be thinking about a mortgage application until Jan 2011 at the earliest. Even then, you are not guaranteed to have a credit record that appears to be "squeaky clean".

I guess what I'm trying to establish is if one us us is self employed, does this mean that our options are to get a joint Self Cert mortgage, or does it all has to be based upon my salary?

If your salary will cover the amount you want to borrow and that amount is less than 4x your salary, then your partner's income would be irrelevant. Or, at least, that would be the case if you had a perfect credit record. With flaws on your credit record then "all bets are off" and it's difficult to predict what the lenders might offer in the future, with that credit record. Sorry - but who knows?

As I said before, your short term goals should be to pay off your debt and build a good deposit. You'll need to look at the lending market again, when you're ready to buy.