Mortgage when paid on dividend

Wishsong

Hi all,

I need some advice please on obtaining a new mortgage.

We currently have a portable mortgage with the Halifax and are 3 years into a fixed 5 year deal.

Since obtaining this mortgage our employment status has changed and our salaries.

We have been running our own business for the past 6 months and are both directors of a limited company.

Part of our wages are paid on PAYE and the biggest part of our wage is paid through dividend.

We now wish to apply for a new mortgage as we have our house up for sale and are dubious as to how much a mortgage lender will take into account our dividends.

What is the protocol applied to dividend payments?

Any advice appreciated

Many thanks

Senior_Paper_Monitor

6 months = big problem.

Dividend based earnings reduces number of possible lenders drastically / One year's accounts (if they are good) reduces number of possible lenders drastically.

I don't think you'll be moving in the short term !

handytips

Yes i think you are going to have to sit tight until you have a full years accounts available. Please remember the accounts will have to show good net profits also, many peoples accounts do not reflect the true drawings.

herbiesjp

When moving from employed to self-employed, have you remained in the same line of work?

Do you have ways of verifying your current and any future income you expect?

What is the purchase price?
What deposit do you have?
What dividends do you pay yourself?

kingstreet

A new mortgage with Halifax and ported existing rate looks like a no-go;-

We require verification of 3 years income by way of SA302s, accountants reference or accounts. For Limited companies we use the combined figures of dividends plus drawn salary and if income verification required these must be confirmed by the accountant. If accounts received do not clearly confirm income we will require SA302s or accountants reference.

You might get some flexibility on an A pass with low LTV but I can't see them going below two years accounts.

Leon_W

I don't wish to be rude but it's a valid point.

Why do people put there house on the market before finding out whether they can raise the amount they require to move ?

I've had a few cases recently where people have actually sold their house and have no chance whatsoever of porting or obtaining a new mortgage and then blame the messenger !

Perhaps the agents are just taking anything on in the hope it goes through rather than doing a little due diligence beforehand ?

Regards

kingstreet

I agree Leon. We do tell people to avoid estate agency advisers, so maybe part of the problem is they aren't getting weeded out early enough because they don't seek advice at the point of going on the market.

It would also help if lenders spent as much time explaining portability and what it means than flogging ancilliary good little earners like insurance.

The number of people who come here expecting their portable mortgage to be a guaranteed deal on moving house beggars belief.

I guess it's easier to sell a deal with lousy early repayment penalties if you over-egg the benefits of portability to make it sound like you can just transfer a mortgage from one property to another.

Wishsong - could you tell us what you were told about portability when you took out your current mortgage?

Wishsong

Hi

I have just checked my mortgage and according to the paperwork it is portable.

Could you explain how this works please.

Do I have to reapply?

What if the house I am buying is less than the mortgage I have now?

Wishsong

herbiesjp wrote: »

When moving from employed to self-employed, have you remained in the same line of work?

Do you have ways of verifying your current and any future income you expect?

What is the purchase price?
What deposit do you have?
What dividends do you pay yourself?

Yes - we are in the same line or work, my father closed his company down and we started it up again.

We are looking at properties max £200k
Deposit will be between 30/35k

Dividends paid

1100 a month to myself
1350 a month to my husband

600 a month each on PAYE

Wishsong

Leon_W wrote: »

I don't wish to be rude but it's a valid point.

Why do people put there house on the market before finding out whether they can raise the amount they require to move ?

I've had a few cases recently where people have actually sold their house and have no chance whatsoever of porting or obtaining a new mortgage and then blame the messenger !

Perhaps the agents are just taking anything on in the hope it goes through rather than doing a little due diligence beforehand ?

Regards

Hi Leon

We didn't envisage this to be a problem, we have an impeccable credit history and earn enough money to cover the mortgage that we currently have and as we are downsizing didn't expect any pitfalls.

This only came to light this morning when I suggested to my husband that as the house is now on the market that we should get a mortgage in principle.

My accountant never told us that as we own the whole Company that we would be deemed self employed.

Wishsong

kingstreet wrote: »

Wishsong - could you tell us what you were told about portability when you took out your current mortgage?

I vaguely remembering the advisor saying "this is portable and you can take it with you when you move"

We are on a 5 year fixed rate of 5.2% and this is our 3rd year