Halifax Mortgage-Self Employed-Proof of Income

indielad

The_J wrote: »

Gross profits are irrelevant.

Oh well looks like Im short of my mortgage by 10K if they average the 2 lower net figures, not sure why Halifax would make you do a projection and just ignore it, as it's wasting mine and their's time.

I noticed on Halifax intermidaries,I would get 10K more to borrow if I pass credit score a and b, but doesn't say what criteria you have more meeting those scaores

opinions4u

The_J wrote: »

Gross profits are irrelevant.

Not totally.

When I was underwriting borderline self employed cases they often provided insight to the sustainability of the business and could be used to identify negative or positive trends about the shape of the business.

By no means looked at in the majority of cases though.

Thrugelmir

indielad wrote: »

not sure why Halifax would make you do a projection and just ignore it, as it's wasting mine and their's time.

Much depends on the source of income / turnover. If you have contracts or orders to supply in place. Then these underpin the figures to a certain degree. As a realistic element of new business could be included.

If you dependent on people walking through your shop to buy, i.e. much is spot purchase. Then you need more historic data. To prove the stability and viability of the business.

While the accountant prepared the figures. Only you know if they are achievable.

indielad

I'm more confused than before to be honest. If gross profits are irrelevant, why do Halifax use your gross income to calculate what you can borrow on their website? Or is this just a rule for PAYE?

Will Halifax lend 4.2X your annual net profit or is it a higher figure? Because they seem to multiply your gross income by 4.2 on their calculator on their customer website. It doesn't make sense that its the same formula.

If I'm a borderline case, it'd be nice to know what 'anticipated credit score a, b and c means, its used on the intermidaries site to dictate what you can borrow. deciphering if I'm anticiapted credit score a , b or c could dictate If I get all the mortgage money I require or not.

The_J

Gross income for PAYE is roughly comparable to Net Profit for self employed.

For both, it's what you pay tax on.

With a score of 813 at 80% LTV you should probably try a B score although it might still be A

indielad

Thrugelmir wrote: »

Much depends on the source of income / turnover. If you have contracts or orders to supply in place. Then these underpin the figures to a certain degree. As a realistic element of new business could be included.

If you dependent on people walking through your shop to buy, i.e. much is spot purchase. Then you need more historic data. To prove the stability and viability of the business.

While the accountant prepared the figures. Only you know if they are achievable.

I've got an internet business, it has been very steady the past 2 years, and I have sales of around £100 K and profit is about 40 % for both this year and the projection. I keep my sales lower dues to the high cost of VAT nowadays. I've found profit per item is useful as I can make large profits, by looking at sales trends from last year which are automatically totted up by my computer and avoid losses. Ive used a lot of profit to buy new stock for next year, my accountant therefore forecast profits of £45,000 but my mortgage advisor advised him to lower it to £28,000 as underwriters are suspicious of large increases.

indielad

I guess nobody knows for sure, If I'll get my full £96,000 mortgage. it's dependent on Halifax's currrent criteria.

Some people have said they will just average the lowest years and ignore any projection tehy asked for, which leaves me just short. Or if they average out the 2 years with the projection and I'll just scrape through, Or they take the highest most recent figure which means I get more than enough.

Thrugelmir

To sustain your business and allow it to grow you need to reinvest your profit into new stock to sell. Not draw it out as salary.

Did your accountant provide a cashflow projection ?

As this is more important than a profit projection.


What's the issue with VAT that you have?

indielad

Thrugelmir wrote: »

To sustain your business and allow it to grow you need to reinvest your profit into new stock to sell. Not draw it out as salary.

Did your accountant provide a cashflow projection ?

As this is more important than a profit projection.


What's the issue with VAT that you have?

Yes, thats exactly what I have done. I keep a 'float of £10,000-£20,000 stock, when the stock goes over the value of £20,000 I hold back buying more and take profit into my bank. Untill the stock level goes to about £20,000

The Vat threshold is about £80,000 of sales So when I charge VAT after that sales are lower, so profit are hit. It's best to keeps sales lower and profits higher or sell more .

The Accountants projected sales of 100K next year, a 60% gross profit, and 28% net profit. Last years sales were 90 K, 63% gross profit, 29% net profit. Years befores 69 K Sales, 62% gross profit, 7% net

Not sure if thos figures help!

My sales have been good this summer so could raise a 25% deposit soon in 2 weeks, unfortuantely i don't have much time as I made an offer on the property 3 weeks ago!

Thrugelmir

indielad wrote: »

The Vat threshold is about £80,000 of sales So when I charge VAT after that sales are lower, so profit are hit. It's best to keeps sales lower and profits higher or sell more .

If your sales are a £100k per annum. Then all your turnover is Vatable not just the excess above the registration threshold.