Self-employed Mortgage- what figures?

pokey128

Hi
we are trying to get a mortgage to allow us to move house in the not to distant future (not sold where we are yet).
We currently have a FD product which we want to port and then borrow a little extra on top of this.
So, we called them today to discuss this and how much they could lend us. What should have been a fairly straightforward number crunching exercise has now taken a very confusing turn and we couldn't really answer her questions properly so am hoping someone on here could advise a little!
Basically, my OH is self employed and has been for a number of years. Last time we remortgaged with them the income figures they asked for were his profits before income tax and NI etc and now it appears that they need the figures after personal tax is taken off? Is this right does anyone know and did we just get lucky last time (as going by what we borrowed last time if it had been post tax figures- we should never have been given the mortgage.)
Any information gratefully received
Cheers

kingstreet

AFAIK, lenders still require accounts or self-assessment documents which confirm two or three years' net profits, ie gross income less capital allowances and other expenses but BEFORE tax and NI.

I can't speak directly for First Direct, but lenders may also ask for net monthly income as a means of establishing affordability. If this is the case, the result is normally similar to the old gross income multiple method.

Worth remembering porting your current mortgage product isn't transferring a mortgage. You need a whole new mortgage to transfer the product to, while you take any additional borrowing on whatever new deals are available and all subject to status. You probably know this but it seems the more often it is repeated on here, the better it is for new readers.

pokey128

Thanks, That's what I thought but the person on the phone was having none of it and insisted it was post tax profits required for self employed so that put them on a par with the employed people. I just thanked her and said I would have to call her back later as I was getting very frustrated.
I'm happy for them to have both lots of figures but we do need the higher figures to borrow what we need.
Thanks for the info re porting, I was aware of it but only through this site and the more people who say it the better!

kingstreet

If they take net income for employed people then yes, they need to deduct tax from the net profits of a self-employed individual.

However, I think the person you've spoken to doesn't understand what net profit actually is and that's fairly obvious given the comment, "it was post tax profits required for self employed so that put them on a par with the employed people."

neverdespairgirl

We were asked for our "net profits" by FD (being self-employed) by whcih they meant our gross income minus our business expenses - our taxable, pre-tax income, in other words.

Jenniefour

It might vary from lender to lender. I'm self employed and had a mortgage from the Woolwich approved a few weeks ago - I had to provide the last three years forms which my accountant gets back from the Revenue when he files my tax returns online. This shows both my nett profit after all business expenses and the tax due. Along with three months personal account bank statements to verify what I had put down on the mortgage advisors forms about my household expenditure e.g. rent and so on was correct. I imagine they wanted to check affordability, and that I wasn't frittering away my income on gambling and the like.

On a previous mortgage application in early 90's I was asked no such thing - all my accountant had to do was send them the last three years net profit figures and verify that they were correct. So mortgage lending criteria has tighened up massively. Its now more or less the same kind of process in the days before they started chucking money about - minus the interviews with your own bank manager.