Income & Affordability - Help for the self employed please!

catieeb06

12 years ago the financial world was vastly different.

Lending has tightened up a hell of a lot. Your personal affordability simply doesn't match the lenders.

GMS

35k income would support a 76,950 mortgage.

35k of equity cannot pay the mortgage.

A lender could not use equity as a reason to lend as it will not support the payments. From a lender point of view they would be secure but when they went for possession there would be accusations of irresponsible lending as the mortgage could not be supported.

Self employed are in a position which could be viewed as unfair. 2 or 3 years accounts required to show affordability yet an employed person could get a mortgage on day 1 of employment with many lenders.

Unfortunately the lenders make the rules so we have to play along.

Fortune82

HappyMJ wrote: »

It costs a lot more in tax and NI but it gets around your dilemma.

That would hurt even more

After all, I set up a company to improve my tax position.

HappyMJ

Fortune82 wrote: »

That would hurt even more

After all, I set up a company to improve my tax position.

I agree...and it's not a long term thing...Do you want to borrow money or not? Once the loan is set up you can buy the company back for two pounds and then do minimum salary and dividends again. Your friend makes a profit of a pound and you can reduce your tax liability.

Fortune82

GMS wrote: »

Self employed are in a position which could be viewed as unfair. 2 or 3 years accounts required to show affordability yet an employed person could get a mortgage on day 1 of employment with many lenders.

Unfortunately the lenders make the rules so we have to play along.

I'm beginning to realise that.

Oh well, year two concludes in June 2012 so we'll see how things lie then.

As for accusations of irresponsible lending......:rotfl:

Fortune82

HappyMJ wrote: »

I agree...and it's not a long term thing...Do you want to borrow money or not? Once the loan is set up you can buy the company back for two pounds and then do minimum salary and dividends again. Your friend makes a profit of a pound and you can reduce your tax liability.

It's an interesting idea, but unfortunately one of the key contracts I have in place precludes me from disposing of the company or ceasing to be a director.

But thanks for being creative, I appreciate that.

Thrugelmir

Fortune82 wrote: »

I have a great aversion to tying it all up in an illiquid single asset.

Ideally I'd have an offset mortgage as I do now, that minimises the interest I pay but crucially gives me access to cash when I need it.

If your business is going to be highly profitable as you state in the next 2 years. Then using your assets to reduce the required borrowing should not be an issue. Neither should you have any requirement for a large sum of cash. As your savings will rapidly be rebuilt.