FTB needs advice

smacky

Hello Everyone,

I have had some great advice in previous threads and just wanted to get some more knowledge on the same.

a little background.

I have been self employed since feb 2009 and operate through Pvt LTd company. I have 2 business and sole director.

1st business setup feb 2009
Last FY profit was 35k
As a tax saving option i took out entire profit as div as i had a part time job during the first 6 months.

Personal tax return filed for £37k
Company paid CT for around 6K


2nd business setup during july 2010
(The only reason it was setup as i started doing wholesale and retail both and wanted to keep them seprate HMRC were okay with it during their visit)

This years profit is about 24k
this years profit for 1st business is low around 11k out of which me and my partner drew Salary of around 5k each !

So y/e aprl-11 & july -11
total salary is about 35k

To add our business is e-commerce based ie ebay/amazon/website
is that considered problem in anyway?

Now have had low score as per experian till last month possible reasons
- my 3 credit cards AQUA , M&S & HSBC were always maxed out since last 2 years (1k + 1.5k & 4 k respectively)
- Also had a 3.5k Loan from HSBC (36 months , 11 payments left)
-HSBC 600£ OD was always in use


Payment History
- missed 1 payment in 2008 on M & S as the bank could'nt honor direct debit for no known reason, Bank said it was all correctly setup and M&S said it was banks fault.

- Never missed any other payment on 2 phone contracts,other credit cards loans etc

- However in last 36 months i got overdrawn 4 times over my granted OD on HSBC, 3 times of those were when a online company over charged me by an error however when i look at my experian n equifax report , HSBC shows that as missed payment. they were between may-july 2010

As lot of my colleagues suggested to pay of credit cards
I have clear all credit cards in last 2 months and bought it to NIL
Just have a loan now where i pay 100+ for next 11 months.

Now we have never maintained any savings in our personal/business account as we like to make every penny we have to be in stock which brings in more money. that attitude i guess is a bit wrong i believe for mortgage seekers ?

Now I need to plan for a mortgage within next 3-12 months as soon as bank can lend me. ideally we were looking at a house ranging in 220-250k. however if thats not possible when we apply then we would go for a flat which would cost us around 150k mark

- we will have a minmum of 20-22k for deposit + legal exp
- we already have roughly 10-12 k saving right now but using it to have more stock (it is advisable for me and my partner to keep 5-10k in bank account rather ?)
- from now onwards i will keep no debt/pending bal , if card is used it will be paid off every month in full

is there anything else i could do to become eligible n be on right track , any advice will be highly appreciated & Once again i would thank all senior members who part their advice on this forum !

Regards

smacky

I do apologize for long post !

Also have another small issue if someone can guide me

at my current address i have been staying since june 2010 so

- length at current address is 1 yr 2 months approx (on electrol)
- length at previous address is 1 yr 1 month (was on electrol however after i moved completly forgot to remove name and credit
report shows was active there till may 2011
- length at previous to that was 2 years

Now we have some plans to move if possible, is it advisable to move , will this affect our mortgage application, if yes then we might just stay where we are .

Reasons to move :
Current agreement is rent all inc council tax,water,gas & electric so nothing in our name
secondly the owner has some prob with council planning permission and they come every now and then to take pictures etc as he has built a loft room with out permission or something, we stay in ground floor flat though as its 2 flats and the council came and spoke to us that if owners dont do the needful then their contractors will come and need to carry out work and cant have tenants present then, they have given 6 weeks notice ,but owner says he will manage to get that stopped and we could stay.

holly_hobby

You will traditionally need 3 yrs audited books ( 2 yrs & accountants letter at a push)

Although your accounts as a whole will be assessed - affordability will be based on drawn salary and dividends - of which some lenders only take 50% of divs (to be bourne in mind when selecting a lender), and your on going commitments (inc loans, credit cards, etc).

Lenders don't typically like to see every penny of profit being withdrawn from the business, as thereby there is no contingency fund, etc. (but it does depend on the business).

My advice would be leave something in the pot for operating capital, after salary/divs have been taken - even if is not technically reqd due the nature of the business, it shows good and responsible business practice.

Being in e-commerce isn't necessarily a negative - e-commerce is a huge growth area, and is having a real impact on the high street. What the UW may want to establish is the nature of your trading (I wouldn't reveal on here to keep you anonmity) - and that the demand/area you trade in, is robust enough to support the mge in the long term, so you may be reqd to give some expansion on your trading activities.

Self Emp mges - UW typically look into everything in more depth - the lower the LTV the better the chance of success, the healthier your credit profile the better - which is just common sense really.

So ring fence borrowing, with all payments made on time every month and evidence of the debts reducing (as I say don't increase any borrowing before you apply for your mge) - this is even more important when you ar self emp and don't have a hugh turnover.

Assessing the 2 sets of books/income as a whole shouldn't be a problem.

When it comes to applying for a mge, as a self emp individual, I would strongly suggest you visit a whole of market broker to have them assess both your financial situation, and the lenders in the market who may be accomodating to your requirements. (which in doing so will save you time & your sanity as oppossed to trawlling the high st)

I wish you well with your business & future home ownership !!

Hope this helps

Holly

smacky

Hello Holly,

It might make me look stupid but what does the term "whole of market broker mean"

- so first we have individuals at bank
- second estate agent company
and ?

Also i was wondering as per your advice some money needs to be left in business account. it is also advisable to keep money in personal account like building upto 10-15k which would be required as deposit or we dont need much proof of the same ?

and lastly i have 4 current accounts

HSBC had since 5 years ( have cc 4.5 limit, had a loan of 3.5, Od worth 600 with them)
Halifax had since last 3 years (have only £50 od with them, they never increased it)(where my first business Sal credit is made)
Santander (since 1 years - my second business DIV drawing are made in this account since last 1 yr- 1 pay monthly div and not yearly)
LLOyds ( since last 6 months)

Which account should i primarily save in according to your experience considering and keeping in mind as to which bank is more favorable towards Self employed individuals

Thankyou

smacky

hope to receive some advise !

smacky

Also would like to know should i cancel any of my cred card or close any current account

smacky

Also how long is advisable to wait on my current situation