Why won't the banks lend to me?

ItMightBeUsefulOneDay

I'm struggling to get any confirmed mortgage offers from the high street banks as I'm a contractor :A (i.e. self employed). That doesn't mean "cash in hand" or "off the books" work, everything goes through the accountant and therefore HMRC (boo-hiss). So it should be straightforward?

Apparently not. :mad:

I need to borrow about £200k (moving to new house) and have a substantial deposit (over a third). While the banks fall over themselves with glee on the figures, they turn very sour whenever I mention that I'm self employed. "We can't offer anything for you, sorry. We need XXX years :eek: of books showing an increasing profit." is about all I get. If I was PAYE, all they'd want is 3 months payslips.

Is there any hope for us who don't fit into the mould of a public sector non-job with guaranteed employment for life? :cool:

Batchy

Unfortunately the loophole that people took advantage of during the last crisis what - self certified...

You unfortunately fall into this category.

On this basis, banks shy away from the risk, and stick with monthly income matched against monthly expenditure. its a lot easier this way.

There would be speicalists still out there, but pretty sure you will pay a penalty for it.

When times are hard the easiest things to CUT are the non contracted employees... ie contractors, or agency staff. As they are expensive and have no claim to compensation.

Good luck however, not everyone out there is trying it on, and im sure your not.

:-(

ItMightBeUsefulOneDay

Batchy wrote: »

Unfortunately the loophole that people took advantage of during the last crisis what - self certified...

You unfortunately fall into this category.

I didn't think I was trying to self certify. All my figures run through the published books and are declared to Companies House, HMRC and so forth via a certified, chartered accountant.

I can't be the only self employed person out there who wants to move house, surely? :question:

dunstonh

Is there any hope for us who don't fit into the mould of a public sector non-job with guaranteed employment for life? :cool:

There is no real difficulty in self employed getting mortgages as long as their accounts show the income over 3 years and the income is consistent.

How much is your declared income and how does that compare with what you want to borrow?

herbiesjp

If you have accounts or self assessment figures, then you should not have a problem - it will only be a problem if you have no track record.

Even with 1 years accounts you can get a mortgage provided the figures stack up and you fit other criteria.

Hopefully the lenders you have spoken to to have not been doing credit searches each time, potentially affecting your score.

I'd suggest speaking to a whole of market adviser who should be able to place your mortgage fairly easily, again assuming the figures stack up.

Being newly self employed makes it difficult to get a mortgage - having a track record with accounts should be as easy as an employed applicant.

ItMightBeUsefulOneDay

dunstonh wrote: »

How much is your declared income and how does that compare with what you want to borrow?

All my income is declared but the accountant writes it up in the most tax efficient way. So bits go all over the place, dividends, expenses, salary and so on. Goodness only knows which bits the banks are looking at.

I'm in the 3 - 3.5 times income. A sensible figure I think and with well over £100,000 as a deposit I'd hoped to get some good deals.

herbiesjp wrote: »

Hopefully the lenders you have spoken to to have not been doing credit searches each time, potentially affecting your score.

We don't even get that far so no they haven't. They ask for proof of earnings and I reach down for last years books and the warning siren starts to flash in the bank manager's eyes. They hardly glance at the figures and ask "Are you self employed?". As soon as I admit to that I get shown the door, "We don't lend to your sort anymore!". It's like I have the plague or something.

Whole market broker sounds like a possibility. I just wondered if anyone (at all) considered the self employed post-taxpayer-bailout as so far it seems the answer is a firm no.

herbiesjp

Most lenders consider self employed applicants AFAIK

Being self employed alone is not a reason to be shown the door.

If you have had no luck yourself, a whole of market adviser would be the best option for you.

Thrugelmir

Contracting, is self employment but as your income is dependent upon one major source, and therefore is not as reliable as someone who earns it from a wide customer base.

What contract terms do work on? Rolling 6 month ?

dunstonh

All my income is declared but the accountant writes it up in the most tax efficient way. So bits go all over the place, dividends, expenses, salary and so on. Goodness only knows which bits the banks are looking at.

The bank will be looking at what you declare as your income to HMRC. The problem you may have is that your attempts to reduce your tax bill are working against you.

I just wondered if anyone (at all) considered the self employed post-taxpayer-bailout as so far it seems the answer is a firm no.

Most do.

JA1000

Why haven't you set up a company which pays you?

ItMightBeUsefulOneDay

dunstonh wrote: »

The bank will be looking at what you declare as your income to HMRC. The problem you may have is that your attempts to reduce your tax bill are working against you.

That is my fear. I can ask the accountant to do less of the tax efficiency, more of the net dividends this year but it seems absurd logic that the less I take home, the more the banks will lend to me.

EDIT:
Does anyone know which parts of the fiscal jargon that are company books the banks actually look at for earnings? Operating profit? Dividends? Turnover?

JA1000 wrote: »

Why haven't you set up a company which pays you?

I have but my wages are tax-efficiently small.