Self Cert fix ending, what next?

funandfrugal

Hi my five year fix with BOS is ending in December. Its a 5.19% self cert mortgage, 18 years left.

Obviously there is no chance of another self cert and I cannot prove my income (Self employed / director minimum wage etc) My year end is 31st August and I could have dividends for the first time, maybe £20k but I don't really want to and it wouldn't be enough. Other income in not includable (if that's a word!) for mortgage purposes - maintenance etc.

Balance on mortgage approx £130k. Value £210k.

I had a loft conversion last December so I have £9k on 0% c/card till next March (This will be settled in March) and took out a 5 year loan of £15k (£300pm till Oct 2014)

I recently remarried and though my husbands gross is approx £43k. The property is mine (and my childrens) so I would rather not include that.

The SVR is currently 3.5%, should I just revert to that and overpay in the short term.
Current repayments are £890pm, loan £300, ccard £500. So in March I would have £500 extra available pm.

My long term goal is pay off the mortgage in 15 years. Buy a second property abroad for retirement.
Some days I think whats the point being debt free, my parents are now using all their savings on care fees!

What should I do re the mortgage?

Many thanks, Tracy x

funandfrugal

100% of business, limited Company. Net profit usually low around £10K, 5 years accounts all showing similar figures. Could be £20k this year.

Thanks

property.advert

Obviously you can do little about the loan as it has 4 years to run but when the 9k on the credit card is cleared in March, then your position looks much healthier.

If you think about March 2011 as your goal then your position to a prospective new lender is potentially thus:

Property - £210k
Mortgage - £130k
Equity - £80k
Loan of £300 per month, £15000 initial as at Nov 2009 expiring Oct 2014. Approximate balance outstanding around £12,909 (based on 15k @ 7.45% over 60 months and 17 months repayments paid, 43 repayments outstanding, no reduction of interest for early settlement applied).
History of multiple years company earnings of £10k potentially rising to £20k in 2011.

Your prospective LTV is 61.9%. I suspect you could get this to below 60% quite easily.

Based on 20k per annum, you would be looking at a multiple of 6.5 which is unlikely even given the 40% equity and probably unrealistic due to the £300 monthly repayment on the loan. Remove the loan, even adding it to the mortgage at a value of 10k and your LTV on (140/210) is 66.7% and the multiple required on 20k earnings is 7 times your income.

Thinking outside the box for a minute. If your partner is happy not to share in your equity going forward, then what about his contribution for board and lodgings ? Just an exploratory thought but what if you set up another account and had a weekly or monthly payment made to that account which was at the limit of the rent a room thing ? I am not saying to tell them that your husband pays you rent as they will surely disallow that but someone paying you rent for a room in your house is an established tax free amount up to a certain limit. If that was say £5k a year, then perhaps, just perhaps, some lender might include this or some of this in their calculations. You may need to ask and play around with the scenario but I would think about it.

If you were told that your main problem was the low income from the company, then it would be possible, but expensive, to have your company make additional profits, on which you would lose tax in that tax year, but which would allow you to show an increased corporate profit. There are aggregators online which show how much of a company profit increase a lender will take into account. You could also bring forward your corporate tax year end or extend it to help figures as well. You have some time to manage that.

Another suggestion is to get rid of the loan. If your husband has the funds, he could pay off the loan and you could save the repayments. Only you and he would know that the funds were his and not yours. With no loan, you would technically be looking at the very top end of what might be achievable but you would have significant equity and no debts. Quite a good position if I were the underwriter.

Just some ideas.

funandfrugal

Wow, that's given me lots to think about. Unfortunately can't get rid of the loan any way.
Will have a look into the Company profits, that's definately do-able, and 8/2009s accounts are being prepared now so there is some flexibility there, so maybe 2 decent years in a row will help - I will look.
Also the 'rent a room' - very useful.
Would it be better to shift the £9k to another 0% deal in March and use the funds to settle the loan early instead do you think.
Thanks so much for taking the time to answer.

property.advert

With a company you really should not be paying full tax unless you need the company to pay full tax. For instance, if you get to the 40% tax level, you can issue share options which give rise to a capital gain and that is free of tax up to about 10k and after that it is only 18%. That is like another 10k tax allowance and a reduction in marginal rate taxation from 40% to 18%. You would need some advice on this but you can google for the basics.

I've had UK companies for 15 years or so and I do all my accounts. Why does your company which only produces a little profit need someone to do the accounts ? You cannot really be selling a gazillion widgets for 0.00001p each can you. I mean, the accounts cannot be that complicated. I understand someone helping you with the numbers but if you need the figures to show one thing and not another then you need to have that person understanding what your end objective is.

There is no guarantee that you can get another 9k 0% deal. Get it paid off and live with the loan. Loans do not use up credit facilities but having 9k on a 9k limit would show 100% usage.

What about hubby ? He earns 43k but you don't talk about his position. I fully understand you owning your own house and I applaud that but he has to fit in somewhere. Does he just accept that he will make nothing from the property appreciation but is prepared to contribute to the household finances ? It is not easy I know but when it comes to filling in the forms, they will want his name as his finances are linked to yours through marriage. Some more details on him would help here.

Whatever you do, get truly clued up on mortgages and what the banks will allow using company accounts. The data is out there - I thought I'd lost this link but look here and then double check with the bank concerned http://www.mortgages-direct-uk.com/mortgage_lenders.htm

Nationwide for instance will need 2 years accounts but they will average the profit. Halifax wants 3 years, Standard Life only one !

Thrugelmir

I understand that you wish to retain the property as its yours.

However have you considered consulting a solicitor and having a legal agreement drawn up. The existing equity would be yours. Then the remaining £130k could be split between you and your new husband.

With his income included you could remortgage at a far lower rate of interest. Then your 2nd home for retirement is more of a possibility.