Mortage for Me (employed) + OH (self-employed)

zarekr

Sorry, from what you said it sounded as if he was operating through a limited company and that he had an accountant to prepare his annual accounts which showed a net profit of 12k. It may be that he simply operates as a sole trader and files tax returns in his own name. In which case my suggestion is not of much use!

What does OH do?

nm123_2

He's a sole trader (carpenter) and has a chartered accountant to do his tax returns, in his own name.

Mrs_Bumble

Your OH could speak to his accountant about the benefits of becoming a limited company and being employed by that company but his net profits don't look like they could show much of an income for him and there are other things to be taken into consideration when setting up as a Limited Company and your OH should take those up with his accountant.

For me the advice remains the same, increase your deposit and put yourself in a better position financially by applying for a lower LTV mortgage. On the incomes you have quoted above you would struggle to get the level of mortgage you are looking at and would also struggle to sustain the mortgage.

What is the expression, more haste, less speed? Look at the big picture, no point in taking on something in a rush and finding that it is much harder than you anticipated, especially as your OH's is a fledgling business. Bide your time and work on your deposit.

zarekr

slightly off topic but i would have thought that your accountant would recommend that he incorporates a company and works through that simply because the tax rates are lower if he is turning over less than 300k and earnings are relatively low

zarekr

snap mrs bumble!

nm123_2

Thanks guys. He's been a carpenter for 12+ years, but was always employed. Last year he left his job to work in a different part of the industry and is now finding the confidence to set up properly on his own (he'd dead excited about a van, a sign with his logo, business cards, letterhead etc ).

Is there a "good" time to set up as a company? Ie, should we wait until the new tax year? Or does it not make a difference?

Also, as I tend to look after the finances in our household, am I able to listen in/be involved with the discussions with the accountants?

I expect we could get our deposit to 15% LTV come next summer. And we're prepared for a hike in current rent vs future mortgage payments. We both save circa £800pm, so the idea is when we have a mortgage we'd just reduce our savings each month and use the difference to cover the mortgage.

nm123_2

I should also add that patience is not my strong point.... Guess I better get used to this!

On the plus side, my bonus is due in June each year so that would be a good time to buy and get a cash injection for new household goodies.

Mrs_Bumble

Your OH has already set his company up, what is being said above is the difference between operating as a sole trader or a Limited Company and he needs to talk through the pros and cons of that with his accountant and I see no reason why you cannot be involved with that if your OH is happy with that.

I would recommend working on your patience! Have you actually looked at what a mortgage of that size would cost you?
£225K @ 7.5% over 25 years on a repayment basis £1682.07
£225K @ 7% over 25 years on a repayment basis £1608.94
£225K @ 6% over 25 years on a repayment basis £1466.75

http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

If you have a look at the interest rates for 90% LTV mortgages you will see that they are fairly high, but it is good practice to make sure that you can afford the repayment even if rates increase further down the line etc.

Get a nice deposit together, get 2 years accounts and then see where you stand.

nm123_2

Thanks for the help, it's really appreciated

Mrs_Bumble

You are welcome:) Good luck!