Mortgage for Self Employed

bristol_rob

Hi all,

A friend of mine is looking to buy a place but he is self-employed and finiding informtation difficult to come by. Does anybody have any suggestions on useful sources of information I can send him and any tips and good and fair providers?

Thanks

costingbunny_2

Not sure what information you need but I am self employed and just got a mortgage from a bank - my oh is employed but only on minimum wage. I just showed my tax returns to prove income and have got mortgages with Halifax and ING direct in the past.

Dan_1976

Best way to get info like that is to see a broker. Self employed people can find it hard but not always as tricky as you would think.

A lot depends on the accounts and time trading. The better they are the better the deal.

Look for a whole of market broker one that is recommended by a friend or family may be a good start.

Conrad

rob, reading between the lines your freind tries to keep his Tax bill as low possible and is now struggling to raise sufficient mortgage.

A decent broker should be able to point him to lenders that have a more understanding approach.

bristol_rob

Conrad, I am not sure I can cofirm or deny those suggestions (I actually don't know).

I genuinely know nothing baout this area, but I know MSE peeps are usually good at this stuff. Great advice from you all so far. I will get him to check brokers in our area.

missk_ensington

I can totally sympathise with your friend, I have been running my business for the last 9-10 months or so, I was about to put my house on the market to move - simply porting existing balance to a new property, but discovered it was a new application and in my circumstances now cannot get a mortgage. I am just hoping to God that in August 2011 when my fixed rate ends, that the base rate will still be quite low, if rates starting soaring and my SVR was huge I have no idea what I would do as the business is intended to make a loss for the first 3 years as it has been 'bootstrapped' (so every penny of profit goes back in to grow it, thus never having profit above zero) so Im not going to be able to show worthy accounts for quite some time yet.

So looks like Im stuck in this house for the forseeable future, which is too small and no longer suitable for my family needs :-(

bristol_rob

MissK, that sounds like an awful situation. Really sorry to hear that.

All the pundits seem to indicate rates will stay low for a while, however I suppose it depends on the election result.

Conrad

missk_ensington wrote: »

I would do as the business is intended to make a loss for the first 3 years as it has been 'bootstrapped' (so every penny of profit goes back in to grow it, thus never having profit above zero) so Im not going to be able to show worthy accounts for quite some time yet.

(

The way I think about this is that us self employed people pay a lot less in Taxation than our employed counterparts so we benefit by keeping more of the money we earn which benefits our families.

But we can't have our cake and eat it - the down side is getting a mortgage is harder.

Having said this there are still lenders that are sympathetic to the self employed and can take a view.

As an example this week I had a self employed speech writer in. I have been able to help her even though her Taxable earnings are 'artificially' low. It's down to having good contacts inside lenders with whom I've built a long standing relationships.

There is a risk to clients such as this, and that is that the Revenue have the right to at any point examine past mortgage applications and if it was found the client had agreed certain expenses were not really business expenses so that a lender might discount these in order to lend more, then the Revenue might bill her for back Tax. Thats the risk they take - but again - you can't have it all ways. If you really want a bigger mortgage then the best way is simply - pay more Tax!

VIGILANT22

Fraudulent Applications

The FSA are investigating more and more brokers for this and the outcome for most is a fine and struck off.

I wonder when they receive a notice such as "You submitted a mortgage application for one of your customers that included false income and employment details. The income figures used in the application bore no relation to, and were substantially less than, the income figures declared to HMRC. The FSA considers that you lack honesty and integrity and, as such, that you are not a fit and proper person......

End of career....I wonder if they reflect and ask themselves, was it worth it for that xxk fee?

missk_ensington

Conrad wrote: »

The way I think about this is that us self employed people pay a lot less in Taxation than our employed counterparts so we benefit by keeping more of the money we earn which benefits our families.

But we can't have our cake and eat it - the down side is getting a mortgage is harder.

Having said this there are still lenders that are sympathetic to the self employed and can take a view.

As an example this week I had a self employed speech writer in. I have been able to help her even though her Taxable earnings are 'artificially' low. It's down to having good contacts inside lenders with whom I've built a long standing relationships.

There is a risk to clients such as this, and that is that the Revenue have the right to at any point examine past mortgage applications and if it was found the client had agreed certain expenses were not really business expenses so that a lender might discount these in order to lend more, then the Revenue might bill her for back Tax. Thats the risk they take - but again - you can't have it all ways. If you really want a bigger mortgage then the best way is simply - pay more Tax!

Thanks, I totally understand that and youre right you cant have it both ways - pay no tax and then want to borrow more. But that isnt so much my predicament. I started my business which manufactures clothing and lingerie for big busted women 2 years ago, with a tiny start up budget (only enough to manufacture one product) and then bootstrapped it from there.

So although our sales are great, all the profit needs to go back in to expand the range - we now have about 12 products but its still nowhere near enough, so for at least the next 2 years at least, every penny will be going back in to grow the business - thus showing no profit, and nothing to mortgage on.

I do have £21,000 a year of income from Child Support, Tax credits, Child benefit etc - but Im not sure how much of this is taken into account for a mortgage. I really want to move house, I only moved to this house because of the housing market crash, I had been really lucky to sell my house and was terrified of it falling through because I hadn't found a property to move to so panic bought a 'safe' purachse next to a good school. But the house is very small, and I had wanted to put the property on the market and move up the ladder a rung.

Failing that, I am also upset with my financial advisor who charged me £300 for his expert advice, who told me in August 2008 to take a fixed rate for 3 years at 5.85% with Halifax. I said I wanted a tracker because I thought rates were going to drop and stay low, he said he wouldnt advise this, and convinced me to take the fixed rate against my better judgement. Now Im locked in at 5.85% when the rest of the country is paying 2-4%

bristol_rob

My mate has finally got his mortgage agreement in principal

Thanks for all your help guys