FTB Mortgage Questions

mdj1

HI All

After renting for several years, we have decided to start looking to buy for several reasons.

One of which is that I know that within the next 2 -3 years the company I have worked for 15 years will be selling the business and converting the land into something else. I currently get paid a very good full time wage for the 20 hours I work a week, but if they cut these hours then the wage will go with it.

So I thought it best to apply for a mortgage with my other half whilst I have the security of the job im in. My other half is a primary school teacher.

Now it's not all doom and gloom on the Job front as I also run my own business which although I don't take a wage from yet does allow me to save a bit.

So, suggestions for the best places to look for mortgages and also, even though I dont take a wage from the business if needed would showing the companies profits be beneficial?

We are looking at the £225k mark with a deposit of 40 - 50k

dimbo61

Best places to look would be start with your bank and who you have savings with as they know your banking history and savings state.
Build up as big a deposit as you can and consider how you would manage on one income ( if you plan on kids / Job security!)
Overpay the mortgage once you have found somewhere and be carefull how you spend your earnings GOOD LUCK

opinions4u

mdj1 wrote: »

One of which is that I know that within the next 2 -3 years the company I have worked for 15 years will be selling the business and converting the land into something else. I currently get paid a very good full time wage for the 20 hours I work a week, but if they cut these hours then the wage will go with it.

You underatand your circumstances better than me. But borrowing a large sum of money knowing that your primary income is about to reduce/end doesn't sound like a good plan.

So I thought it best to apply for a mortgage with my other half whilst I have the security of the job im in.

You just said it wasn't secure.

So, suggestions for the best places to look for mortgages

www.moneyfacts.co.uk to identify price. A well established and reputable local broker for face to face information.

and also, even though I dont take a wage from the business if needed would showing the companies profits be beneficial?

If trading for 2+ years, the accounts showing a healthy net profit figure could be useful.

mdj1

Thanks guys, just to clear something up.

Even if I lost my full time job I could quite easily pay myself the same wage from my own business, but I'm thinking the 15 years employment on the wage im on would get me more brownie points.

benjo

If you are going to use your self employed income now or at any time in the future you will need to have accounts (2 or 3 years worth) - that match the figures you supply to the inland revenue.

I only mention this since there are so many people who are self employed (you really dont sound like one of those) that either havent declared their income to IR at all or have declared 'minimum wage' in order to maximise their tax position , only to find themselves turned down for a mortgage a year or so down the line on affordability criteria.

Since their accounts for tax purposes show earnings of half a shilling a week then obviously they couldnt possibly afford a mortgage or maybe they could, but that would mean admitting to a lender that they had massaged the figures aka fraud = lenders run a mile.

This leads to people being stuck for another 2 - 3 years while they submit more accurate accounts to IR that will be acceptable to a mortgage lender.

Best bet is to save like a maniac and get the biggest deposit you can, that way if there are any issues regarding your job security then your other half would be more able to meet the affordability criteria alone - depending on wages and price of house of course.

mdj1

Hi Benjo

This is why I say that I would like to get it done now whilst I have the full time job (well 20 hours a week) and get a full salary. Rather than having to go down the self employed route.

Can someone also clarify the position of Deposits.

You obvioulsy have to prove that you have this in place, but some of mine is money that I loaned to my company to start up, which the company still owes me and I can take at any time, but obviously its not "in my hands" so to speak.

Joe_Bloggs

@mdj1
What you suggest is that you want to deceive or create an impression to a mortgage lender into thinking that you have part time paid employment prior to switching into self employment once you have the mortgage.

If this self employment is so lucrative then what is the need for the apparently 'underhand' approach ?
J_B.

mdj1

Urm, no I have FULL TIME employement that pays me a FULL TIME WAGE.

Where is the deception?

benjo

On your mortgage application you are asked about your income - you have two sources of income (I think) ie one from your part time job (20 hours a week) and one from your business, you cant avoid owning up to this - well you can, but that would be fraud.

If you have enough income from your part time job - the lender 'may not' ask for further details of your business income, but they might well ask - since a business can loose money as well as make a profit and the potential loss of income might be of interest to a lender even if the income isnt relevant for your application.

Im not a mortgage advisor and Im no expert in taxation so I in my ignorance I dont understand how your business makes enough money to pay you an equivalent wage to your current wage yet you dont draw any wages - sorry, where is that money? How does it allow you to save - if you dont take any wage from the business? It is a rhetorical question - but lenders might well ask this - not a problem since it will all be explained in your audited accounts.

As for a deposit, yes it has to be in your hands/your bank account....otherwise you dont have a deposit do you? While it is in the account belonging to a business you will have to prove that the money is repaying a loan to you and not a loan you are taking from the business - but your audited accounts would show this.

Solicitors also do money laundering checks on your deposit. You lent your business money, your business owes you money - you take it back no problem, they will just want to be certain re the origin of the initial loan you made ie. did it come from your savings you made from your wages on which you already paid tax? or for example is it money, unlawfully gained or shifted through a bogus business purely to avoid income tax? thats what they are looking for.

Thrugelmir

mdj1 wrote: »

Can someone also clarify the position of Deposits.

You obvioulsy have to prove that you have this in place, but some of mine is money that I loaned to my company to start up, which the company still owes me and I can take at any time, but obviously its not "in my hands" so to speak.

If your Company owes you money that you originally lent to start it up. Then you should be drawing this money from the business not a wage (which is taxable), until such time as the loan is fully repaid.

I am confused that your own business allows you to "save a bit" although you don't draw a wage. If you are potentially going to be dependent on this "income" to pay the mortgage in the future I would consider the position carefully. As the HMCE can assess tax on income retrospectively, beyond 6 years there is no right of appeal, and the penalties are severe. I have first hand experience of someone who encountered this fate some years ago so always express caution.

mdj1

HI Guys, Thanks for your concerns, believe me, everything is above board, i'm not on the fiddle!

I don't need to draw a wage from my own business because my full time job pays me enough. However I do draw Dividends from the business which is what I save.

Should I lose my full time job I would still be able to draw a wage and the dividends from the business equal to that of what I was earning before, but obvioulsy any lender is going to look more favourably at someone who is in full time employment for 15 years rather than someone who is self employed, correct?