Im self employed - can I borrow extra?

nickackland

Good evening friendly people.

I hope that if I explain my current situation and intentions, I might receive some helpful advice/suggestions/opinions.

My fiancee and I bought our house in Oct 09 for £93k. We supplied 10% deposit. Since buying the home we have improved it significantly, and 2 valuations last year suggested the house was valued at £115k.

We would like to borrow 15k extra against the value of the house - to do more work to the house - double glazing, 2nd bedroom, new shower room, sort garden - this should increase value further. We would then hope to sell at the end of the year for between £135k - £145k.

I am self employed - but work for one company and bill them the same each month (all 100% above board). Therefore, although I am self employed, i know how much my 'salary' is per annum.

I've been self-employed for 12 months (since March last year) so have a years worth of accounts.

Im in a 5 year fixed deal with RBS, which expires August 2014.
They insist on 2 years worth of accounts.


My first question: If I borrowed an extra £15k on a 2 year fixed deal - at the end of that 2 years will I have a huge amount of interest to pay ontop of the £15k I initially borrowed?

Are there any favourable lenders or alternative options out there for people who are self employed and with only 1 years worth of accounts, as RBS seem unlikely to be able to help.

Sorry for the waffle, but wanted to give you all the facts. Any replies to educate me will be greatly appreciated!

Nick

Dave_Ham

Hi Nick,

Good opening post in terms of details.

Firstly you have done the wise thing in approaching or at least considering RBS. They already have "first charge" on the property and therefore would be able to offer you the most preferential results.

Unfortunately you do not meet their employment criteria and additionally I am not convinced you would meet their loan to value either.

You can get a "second charge" mortgage or secured loan but unfortunately given the loan to value and employment status this will be expensive.

My 2 suggestions would be to:

See if the window company will do interest free credit? or get their interest rate and costs or secondly look at an unsecured loan

I would imagine both of these options having less "added" charges and probably at a lower rate.

Hope this helps a bit...

kingstreet

I'm glad Dave got here first.

Where to start?

- the two valuations last year. Were they carried out by surveyors or by estate agents you got in who might think you were going to instruct them to sell?

- your chances of adding 50% to the value in just over 2 years is very ambitious

- being self employed means you can only submit accounts or SA302s to confirm your net profit and most lenders need at least 2 years worth

- your existing mortgage deal means a large penalty to leave RBS for a new lender, or the need to borrow on a "second charge" basis if RBS won't agree to some "additional borrowing"

The plan appears fraught with danger for you. The only way you are going to get this money is via a lender and a rate that will not really appeal to you. Think secured loan, think 11%+.

A surveyor tasked with valuing your property is likely to think the things you have done to it will doubtless have increased its saleability, but the added value is unlikely to be the £22k an estate agent might suggest.

Please be careful with this. Dave was very diplomatic.

ACG

Principality will offer mortgages to people with only 1 years accounts...im waiting until august before i can get myself another mortgage, so iknow this one inside out.

There is also another company recently launched a mortgage for the self employed called kent reliance.

I dont know whether either of these will accept you but it might be worth looking into. Dont forget you will have an early repayment charge to consider.

InsertWittyName

nickackland wrote: »

I am self employed - but work for one company and bill them the same each month (all 100% above board). Therefore, although I am self employed, i know how much my 'salary' is per annum.

I would double check with HMRC that you should be self-employed and not employed - it's pretty much them who decide

http://www.hmrc.gov.uk/employment-status/index.htm#1

Simon_gloster

InsertWittyName wrote: »

I would double check with HMRC that you should be self-employed and not employed - it's pretty much them who decide

http://www.hmrc.gov.uk/employment-status/index.htm#1

Thats a good point, when I originlly read the first post, I thought, you sound employed not self emp.

Call.RBS again and explain to them they do your tax etc an you only work for one company.

Good link above though.

Even if they say your employed, equity for you is more of an issue.