Rent or Buy?

Dummie_2

That's the BIG question. Rent or buy? Or maybe I should say rent or can we afford to buy?

Here's the situation.

I am the lease holder of a fish & chip shop. Have been running the business for just over 3yrs. We have a buyer for the business and once everything goes though and we pay off all our debts (we will then be totally debt free)we should have around 50-60,000 left.

My husband is joint director of a trading company which has been up and running for just over 1yr.

When we have sold the shop we will both be taking the minimum wage from the trading company and then take the rest as a dividend payment once or twice a year.

The trading company is doing well even though my husband has only been working on it part-time during the past year. He's not been receiving any salary from the company for the past year as everything has been put back into the company.

We've worked out that if worse comes to worse and there is no dividend payments then we are entiltled to just over 6,000pounds per year in tax credits.

Not really sure if all the information above is relevant or not but thought I'll mention everything I know.

Can anyone tell me if it's likely that we'll be able to get a mortgage and if yes then how much we would be able to get and what kind of monthly payments will we be looking at?

We were orignally planning on renting with a monthly rent of 800-900pounds but my husband says that if we buy we can have monthly mortgage repayments of less than that (he said about 600). Pls don't ask me where he got this info from. I have no clue!

Thanks in advance for your help.

lynzpower

both of you on the minimum wage I shouldnt imagine would get you much of a mortgage at all.

Would you be paying off lump sums of the mortgage with the dividends?

Dummie_2

Will it make a difference?

My thoughts were 94pounds per week x 2 x 52weeks = 9,776. Then say tax credits = 6,000 (or dividend payments of at least this amount but lets play it safe)

This totals 15,776. Split by 12mths = 1,314.66. Can we not make 600-700 monthly mortgage repayments from this?

lynzpower

Is that 15776 your combined income or each?

Dummie_2

I wish it was each but I'm afraid it's combined.

Bear in mind that this 15776 is after tax and we have no further debts.

So say 1,314.66 to spend per month. 600 or 700 goes to our mortgage this leaves us with 600 or 700 remaining each month for utilities, supermarket shops etc.

lynzpower

what that would mean dummie though is ( pretax I duuno this is back of a beermat calcs) you would be able to get a mortgage of 47328, being 3x your joint income.

I dont know if that would get you much -would it?

There may be an opportunity to get a more "affordability" style mortgage, but most people say any more than 4x your income is playing fairly dangerously.

Surely someone else must have ideas- Im no expert sadly.

lynzpower

anyone

chivers1977

What tax credits are they as some lenders will not accept them. i know that Woolwich do not accept CTC. Also you would need to have 3 yrs audited accounts for a lot of lenders. What did your husband do before?

silvercar

Sounds like you need a self certification mortgage. These are designed for those that have the income though it is not in the usual PAYE form that employees have.

A broker will know how to convert your dividend salary to the equivalent PAYE salary. Your big problem will be the fact that you haven't been trading for long.

I would be inclined to wait until the shop is sold and your debts gone before applying.

Dummie_2

chivers1977 wrote:

What did your husband do before?

My husband runs the fish and chip shop with me. He's been getting paid the minimum wage (as advised by our accountant).

Dummie_2

silvercar wrote:

Sounds like you need a self certification mortgage. These are designed for those that have the income though it is not in the usual PAYE form that employees have.

A broker will know how to convert your dividend salary to the equivalent PAYE salary. Your big problem will be the fact that you haven't been trading for long.

I would be inclined to wait until the shop is sold and your debts gone before applying.

So once we've sold the shop and our debts gone, our income/accounts from this business will not be taken into account?

Someone told my husband that because he was the director of a ltd company, the company's annual turnover will be taken into account. Is this right?