Mortgage Application Help Needed!

bargainhunt2012

hello there,

Some expert help is needed to make right mortgage application.

IFA recommends a deal which is unacceptable and suggests that mainstream products are unavailable.

Applicant 1 (age 47) is a company secretary, other partner of business is director and the business premises are jointly owned by two partners. The company is charged a rent which is surplus over the commercial mortgage payments and thus both partners have regular income on top of the salaries. No dividend payments are made by the company despite making profits. Total of three years return show total income (salaried income + surplus income from company) of more than £55000; Separate BTL property generates additional £6000 per year (in addition to interest + capital repayment).

Applicant 2 (age 40) is a self employed professional for two years and was in salaried employment prior to that. Total income of 20000, 18000 for last years.

Both applicants dont have any missed payments, CCJ or any outstanding credit card debt.

They are looking for £305000 to borrow with 25% deposit.

Any ideas which lenders would be best suited for these nice people!

feel free to PM me if you need to. I give you permission to send me details of suitable lenders/brokers if appropriate.

Kind regards

Thanks.

ACG

You dont say how long applicant 1 has been effectively self employed for.
Also you dont say if the rent is declared income on the business premises along side the buy to let (ie do you pay tax on it).

Senior_Paper_Monitor

You are looking at borrowing at in exess of 4 times income (by how much depends on the definition of 'surplus income') which in itself limits the number of potential lenders.

Any financial commitments - loans, guarantees, school fees, maintenance etc - will decrease the income, as will any dependents for most lenders.

AS ACG indicates considerably more detailed information is needed and would have to be evaluated closely, BUT my guess is your original IFA was correct.

GMS

How is the recommended deal unacceptable? Which lender was it?

Simon_gloster

Although it sounds like a viable option, as ACG states, it really depends on what income wa declared to HMRC as thiis the figure lenders will use.

Thrugelmir

What is the "surplus income from the Company" ?

bargainhunt2012

Ok...
More detailed info:
On HMRC tax returns the total income is in 80k (30k salary and 50k rental income paid by company to rent the business premises) company itself is trading for more than 4 years prior to that business operated as Partnership;
Rental income of 50k is net i.e. gross - interest payment

Recommended product is from a subprime lender with one year fixed followed by variable 5.74%!

I have looked at lending criteria of Coventry building soc - does anyone have any experience with them? Good or bad pls share;
I m surprised why IFA didnot look at Coventry building soc?

Thx for all replies

bargainhunt2012

Pls ignore the figure of 55k in the first post it was a mathematical error!

Senior_Paper_Monitor

.... and Coventry will not count the rental income (this is from first level broker helpdesk - it is the sort of case that will need pre-arguing with a BDM or lending manager, probably with one of the smaller lenders).

As I stated above (albeit much of the comment based on the incorrect income information) this is not as easy to place as the layman might assume.

It will need careful preparation and selection of a lender who will listen to an argued case.

Whether your IFA's selection is correct I cannot comment with the information available.

Conrad

The best rate I know of for this is 3.35% 3 year fixed, so if your IFA hasn't come up with this then you've work to do.

bargainhunt2012

This is from the lending policy of Coventry Intermediaries Website - which obviously states that the rental income from business is acceptable as secondary income:

We accept the following sources of secondary income:
-State retirement pension (SRP)
-Private pension
-Company/ Occupational pension
-Rental income where the applicant can confirm that the income is derived from a business, can provide two years accounts (one year for Buy to Let applications) or two SA302s and meet all other self-employed criteria.

We do not accept the following sources of secondary income:

Income from temporary employment
Child/ working family tax credits
Disability allowances
All other state benefits
Maintenance (including court ordered)
Bursaries and other educational subsidies
Foster income
Rental income where it is secondary income that is not derived from a business