Cant get a mortagage for 20% of property value?

Timewitch

Hi There

I am looking for some advice.

I have just decided to move house. My current mortgage balance is for 10K on a property worth 260K. My current mortgage with Santander is for 120K so I can draw against it if I need to. (Offset mortgage)

I want to move to a house worth 300K to do this and pay all the associated costs including stamp duty I need to have a mortgage total of 60K which I am well able to afford. I did not think this would be a problem as my credit rating is imppecable.

However for the past 15months I have been self employed. My lender informs me that they can not go through another mortgage application unless I can provide 2-3 years of accounts which I cannot and even if I could they would not look terribly great as for tax reasons I run my business down to make it look like I earn very little - perfectly legal and there must be 100's of other sole traders that do this!

Its very annoying that my mortgage company are happy to leave my mortgage how it is - where I can take up to 120K but will not give me a new mortgage for 60K????

Can anyone help me out here or offer advice on my options.

Jojo1daffy

Don't really know what to say to that...

Thrugelmir

Timewitch wrote: »

However for the past 15months I have been self employed. My lender informs me that they can not go through another mortgage application unless I can provide 2-3 years of accounts which I cannot and even if I could they would not look terribly great as for tax reasons I run my business down to make it look like I earn very little - perfectly legal and there must be 100's of other sole traders that do this!

Hard to hide non business expenditure in a set of accounts. Normally this suggests that income has been diverted away if profitability is low for the activity undertaken.

Of course the accounts could be a true reflection of the profitability of the business.

Indecisionismymiddlename

I know i'm new etc etc but there is only so much an accountant can do to a set of figures to minimise the tax on a set of sole trader figures.

You can't turn a net profit of £100k into a 15k one without doing stuff that you shouldn't.

Horrible thought just struck me that maybe I'm wrong. Maybe my accountant's not found the magic method to put through my holiday in maldives as a tax expense.:eek:

hcb42

a lot of people are caught in this trap in that they do not meet current lending criteria, even though they pay a current mortgage.


You could try a broker, but I expect the same issues will crop up, however there must be someone out there, providing you "earn" enough

Timewitch

The accounts do show a profit but only for the last 12 months. I am well able to afford the repayments but cannot provide the 2-3 years off accounts the mortgage companies seem to require.

I am very upset about this as I have been so careful to keep my credit rating squeaky clean. Ive never overstretched myself financially. Now I find out that the issue is not with whether I earn enough or how well I have managed my money but about whether I am self employed or employed by a company.
If I had known that it would affect my ability to get finance I would never have left my job and become freelance.

I find it incredible that I cannot get finance of 60K on a 300K house as surely there is absolutely no risk to the mortgage company as the loan is secured on the property??

My family is bursting at the seams in our current house and we have been putting off a move and busting a gut pay as much off our current mortgage as possible to we do not have to borrow too much! And now I find we cannot move at all - very upsetting.:mad:

If anyone can recommend a lender who sees things a bit differently please do let me know.

CLAPTON

how much profit do your last 12 months show?
are these certified by an accountant or a tax return

GMS

Timewitch wrote: »

The accounts do show a profit but only for the last 12 months. I am well able to afford the repayments but cannot provide the 2-3 years off accounts the mortgage companies seem to require.

I am very upset about this as I have been so careful to keep my credit rating squeaky clean. Ive never overstretched myself financially. Now I find out that the issue is not with whether I earn enough or how well I have managed my money but about whether I am self employed or employed by a company.
If I had known that it would affect my ability to get finance I would never have left my job and become freelance.

I find it incredible that I cannot get finance of 60K on a 300K house as surely there is absolutely no risk to the mortgage company as the loan is secured on the property??

My family is bursting at the seams in our current house and we have been putting off a move and busting a gut pay as much off our current mortgage as possible to we do not have to borrow too much! And now I find we cannot move at all - very upsetting.:mad:

If anyone can recommend a lender who sees things a bit differently please do let me know.

There ar elenders who will consider with 1 years accounts. What sort of profit do your accounts show?

Timewitch

The accounts for the last 12months will show a profit of about 25K and it is increasing we have an accountant who would be able to verify this. The turnover is about 200K

Thanks for taking the time to reply its appreciated.

The house we want to buy also has business potential in terms of letting out land, which would also provide an income, but I guess its unlikely this would be considered.

GMS

Timewitch wrote: »

The accounts for the last 12months will show a profit of about 25K and it is increasing we have an accountant who would be able to verify this. The turnover is about 200K

Thanks for taking the time to reply its appreciated.

The house we want to buy also has business potential in terms of letting out land, which would also provide an income, but I guess its unlikely this would be considered.

60k sounds achievable on 25k income.

Speak to a broker to see how to proceed

Timewitch

Thank you again, you have given me hope - I was getting quite bitter and twisted :beer: