Employed + Self Employed (Mortgage query)

aliasojo

I think I'm right in saying that normally if a working couple apply for a joint mortgage, it will be decided on a specific formula of so many times the main wage plus so many times the second.

What happens if the main earner is employed and the partner is classed as self-employed (small income). No business as such, no records etc, income small enough to be exempt from N.I. contributions although small amount of tax is paid.

Is there some way to include the second earnings or would these only be eligible to be considered if there were statements or some other type of official records relating to self employment?

Thanks in advance if anyone has an idea.

Joannaclaire

Both my husband and I are self employed (separate businesses) and have been for 4 or 5 years now. Luckily we have a decent deposit so the mortgage advisers we have talked to say a mortgage isn't a problem. Had we known this earlier we would have jumped on the property ladder before now, but I was under the impression that self employed = no mortgage for some reason.

All we needed to show them was the last 3 or 4 years of company accounts or tax statements showing net income; one of us earns 3 times what the other earns... and that wasn't a problem either. So the lender was more than happy to give us an agreement in principle.

aliasojo

Thanks for reply Joanna....in my case the only 'official' thing I have is a letter from the tax office telling me what my tax bill was for last year.

I suspect more than that would be needed by any mortgage company though, if they were to include my income on a mortgage application.

Fairdo_2

"I suspect more than that would be needed by any mortgage company though, if they were to include my income on a mortgage application."

Not necessarily.

It would be useful to know roughly what sort of deposit you could put down. The onus on a lot of these cases would be on you as a direct applicant, someone like myself as a broker, or the lender themselves to satisfy the fact that the income is there. If the deposit is sufficient (25% would be ideal, but in some cases as little as 10% deposit is sufficient), then the lender may be inclined to "fast-track" the mortgage, without seeking proof of the income.

Your existing bank where you hold a current account might also be a decent bet, as they will already be able to see a history of your incomings and outgoings, therefore, they may be more inclined to work your mortgage out on an "affordability" basis.

aliasojo

Fairdo wrote:

Your existing bank where you hold a current account might also be a decent bet, as they will already be able to see a history of your incomings and outgoings, therefore, they may be more inclined to work your mortgage out on an "affordability" basis.

Problem with this being that although OH wage is paid direct to account every month, my income is got through cash and never goes near the bank.

Without going into too much detail on here, my role is to organise a particular service, I take on people to supply this service and then supervise the running of it/them. These people collect payment for the service from the customer and then pass to me. I attend to paperwork required, deduct my payment then forward paperwork and remaining cash to main business I 'work for'. (Italics used as technically I'm classed as self-employed therefore actually work for myself.)

Lol! Just re-read the above and it makes me sound like some sort or 'Madam'. I can assure you all that what I do couldn't be further from the truth.

Anyway, my income is the same from week to week and as stated, doesn't go near the bank - it's just used towards housekeeping.

The only thing that does state amount I get, is the paperwork that I forward to the company. I have to list various details on paperwork and list a deduction for my fee at the bottom. Not exactly the kind of thing that is normally asked for as proof of income, but I do have copies of these for around the last 18 months.

Our existing mortgage was only based on OH wage, and we can just go down the same route again, but I just wondered if my income could help to increase the amount we might be able to get.

It's very likely we would be able to put down at least a 25% deposit (after sale of this house that is).

We're not in a desperate hurry to sell up or buy, we've just started looking around and are just considering options at this point. It would just be useful to know whether my income could possibly be considered or whether it is a definate no no given the circumstances.

Thanks for all input.

Fairdo_2

aliasojo

I was starting to wonder!

I can't see there being a problem taking your income into account, as I feel you are being quite harsh on yourself regarding the proof of income.

If you have the invoices for the last 18 months and they are pretty steady, then I would have thought that many lenders would be satisfied with that as a track record.

When you have 25% or more deposit, then that should not even be requested with several lenders, as they can offer a "fast track" system, meaning they will assume you are not lying about your income because you will be fronting a reasonable amount of equity as the first level of risk.

It's not to say that you can put what you like, because there is still a responsibility to ensure affordability. Also, with fasttracking, most of these lenders to random checks, say about 1 in 20 applications, where they are able to check the case for proof of affordability.

This is deemed to be sufficient to discourage fraudulent income declatrations.

I hope this is of some use.

If you wanted to go into more detail, you are welcome to pm me. However, I generally log in once a day, as times are busy with the day job.

Kind regards

Fairdo

aliasojo

Fairdo, thank you again for your help.

One thing I should clarify though.......paperwork forwarded couldn't (I don't think) be regarded as an invoice.

It is an Excel spreadsheet printed on A4 paper with details of what was supplied and the costs involved. It's more for information purposes for (their) company books than anything else.

Fairly basic stuff really, there's nothing relating to tax/vat/payment terms, none of the usual invoice type stuff...the part relating to my 'fee' is a tiny deduction at the bottom.

titianbear

We are in the same situation - both self employed and have just come from a meeting with bank - I am in N.Ireland and dont know what, if anything applies on mainland, but heres the official line here.

Income must be proven for at least the past 2 yrs would prefer 3 yrs. Accountant books or tax return will suffice. Otherwise the only mortgage available is a self-certified option which will cost you a much higher interest rate (instead of 5% approx 7%) and most banks will not offer this type of mortgage. Go to a independant finanical adviser this is your best advice anyway. Income must be proven no matter what amount of deposit you are able to put down, as we had been told once you pay 30% of the property they didnt ask for proof.

Hope you are successful

Fairdo_2

Sorry for the delay Aliasojo.

It has been so busy with the day job, I get less and less time to contribute, or even read the boards.

I still stand by what I said before, relating to income.

If you have enough deposit and sufficient income to cover affordability, there are enough lenders out there who would "fast-track" your application and not ask for the proof of this. I am not being flippant, as it is your responsibility (and mine as an adviser, for example) to prove in our own rights that you have sufficient income. Many lenders do also carry out random checks to deter fraudulent applications, but an excel spreadsheet may be sufficient (subject to Data Protection constraints) to prove to Lenders satisfaction that they have been responsible in their lending.

If you have 25% deposit or more, this should be sufficient for several lenders.

Kind regards and good luck

Fairdo

aliasojo

Many thanks for all your advice Fairdo.

I think when the time comes, we shall certainly include my income for consideration in any new mortgage application now that we know it may be feasible.

The worst they can do is say no and exclude it, lol.

Fairdo_2

Good luck when the time comes, lol.

Feel free to pm me if you have any other questions that may involve figures.

Not touting for business, as I am dealing with plenty of that at the moment!

Fairdo