Self employed - Any lenders who base income on last year's accounts?

Lizbetty

Hi!

I'm in a flummox. We've seen an IFA today (connected to our estate agents) about getting a mortgage, as we're hoping to move. The house is only just on the market, and so we're just making sure we can borrow what we need.

We were quite giddy that it seems we CAN get the mortgage we need, but on coming home and googling a bit it seems that the deal is not actually that great in comparison to some of the offers out there.

My husband has been self employed for a few years and he can provide the necessary 3 year's accounts. But the first 2 are not good. On a positive note, they're not minus figures! They're around £5/6k. We have been told that some lenders will need to see all three years but will base the figures on the last year's accounts rather than the average of the last three years. That would be pretty essential to us as the earnings were pretty dire as he was getting established. I can see how we would be limited to certain lenders/products in that sense. Profit is showing an increase however, a projection would certainly show that too.

We're in a good position as we have good credit ratings and approx 30% ltv, which is lucky! (<<Me being positive again.)

I know it's an ever changing market, but wondered if anyone knew of a lender who has competitive products but who would have this sort of criteria for self employed (ie using the last year's accounts to calculate how much we can borrow)? Natwest came up on the search, but the variable rate it reverts to seems quite high at 4%. And so the discounted rate seems more in line with our current standard variable with IF.com Which is ok I suppose, but I can't help but think we can get a better deal.

We're so pleased that we can actually borrow what we need when we eventually need to, but at the same time getting a good deal got sort of put on a backburner as we were so busy doing starjumps at being able to borrow what we need iyswim!

All advice welcomed. We get £100 off the agents fees if we take the mortgage with the IFA, and it could be a good option I suppose as there are no fees to get out after the discounted rate period...but of course remortgaging after the discounted period means solicitors fees, etc... Bah.

TIA for any advice out there!
Lucy

Thrugelmir

Lucyeff wrote: »

but the variable rate it reverts to seems quite high at 4%.

Average variable SVR across all lenders is approaching 5%. So in context 4% isn't as bad as might appear. The days of abundant cheap mortgages are over.

ACG

Some lenders will do it on last years only, some will do it on an average of the last 3.

I was in the system we use anyway so have just done a quick search...
1 years account, the deals around arnt that great. 2 years accounts, they arnt that far off what you would get if you were employed.
That would increase the average income as you only have 1 years worth of low accounting.

That being said, those figures arnt based on your income or your details so dont take them to heart, they are just examples based on the client i was working on.

Trust your broker :-) your paying him/her to do the work.

Lizbetty

That makes me feel a lot better, thanks

We're getting free advice (a perk via the estate agent, he said!) and so it seemed daft to pass up the chance. I used to deal with this stuff on a regular basis but it was over 15 years ago (gulp!). A lot has happened since then! It feels like unknown territory now and so I don't feel equipped to double check everything any more.

I should learn to be more trusting..

Thanks again. I feel a lot more confident now going back to him when we need to, knowing it's not actually such a bad deal. x

Worms_that_turned

We completed today and my husband was self employed up to April 2011. My advice would be make sure you give them every piece of supporting financial evidence you can think of and keep it easily to hand so when the repeated requests from the underwriters come (and believe me, they will) you and your mortgage advisor can be one step ahead. We ended up with everything scanned on to a closely guarded memory stick so it could be sent as soon as they asked for it yet it again. We've had an abysmal experience with Santander and they drove us, our mortgage advisor and our solicitor almost insane with requests for P60s, payslips, tax returns etc etc again and again. I appreciate this is more 'practical' advice rather than 'financial' but I've written on here for the first time as I'm aghast at how our application was handled. Good luck!

Lizbetty

Worms_that_turned wrote: »

We completed today and my husband was self employed up to April 2011. My advice would be make sure you give them every piece of supporting financial evidence you can think of and keep it easily to hand so when the repeated requests from the underwriters come (and believe me, they will) you and your mortgage advisor can be one step ahead. We ended up with everything scanned on to a closely guarded memory stick so it could be sent as soon as they asked for it yet it again. We've had an abysmal experience with Santander and they drove us, our mortgage advisor and our solicitor almost insane with requests for P60s, payslips, tax returns etc etc again and again. I appreciate this is more 'practical' advice rather than 'financial' but I've written on here for the first time as I'm aghast at how our application was handled. Good luck!

Congratulations on completing!! :T I have heard horror stories about Santander generally, sorry to hear you had a bad time with them. Such good news it's over for you now!

It is a very good point - I've started by getting paper statements and cleaning up the bank accounts a bit..I tend to be a bit slapdash and use my overdraft on unnecessaries, so it doesn't look great. I am in control of it, it looks worse than it is. But of course they'll see it and scratch their chins no doubt. Thanks for the tip - it is a very good point. We will be stretching the income somewhat and so I guess they'll be pretty hot on crossing the t's and dotting the i's. I'll have to make sure we're ahead of the game and it'll hopefully save us a bit of time...no doubt we'll be holding our breath until it's all been approved!

The house is going up for sale next week so it seems premature thinking about mortgages being approved already in the present market, but I'm making sure we're prepared. Who knows what will happen next? I hate not knowing how things will pan out, but I guess we just have to wait and hope that lots of people love the house, there'll be a huge surge of offers, we have the pick and end up not needing to borrow a penny! My hands are sweating are the thought of the alternative! :eek: (Middle ground is probably the best place to hover if I'm to keep relatively sane I suppose..)

Thanks again :beer: x

kingstreet

Just got this from Halifax;-

Self Employed

- We use either the client's average income, or the last year's if there's been an increase

- We can also accept applications where only one year's accounts are available

among some other bits and pieces...

Lizbetty

That sounds like very good news! Thanks for posting :jI'm with IF.com who I think are part of the whole Lloyds/Halifax-ness these days. But they're closed for business to new mortgage customers, which my husband would be as the mortgage is in my name. Booo!

We will actually only be paying £40 per month more for £72k rather than the £32k we have! We overpay at the moment every month and have done for a while, and are on standard variable.

I feel so much better about it all now. We've gone from wondering if we could borrow anything (even though we know we can pay it) to concentrating on worrying about selling the house instead

Thanks again for taking time out to post that information :beer: