Mortgage application - self-employed

wendybird

Just looking for some advice really.

DH and I are looking to buy a house as we're being kicked out of our rented. I'm concerned about getting a mortgage as I've gone self-employed in order to be home with our 2 young kids. I've already been advised that my income won't count and we'll need to apply based on DH's income of 30K. Any chance we'll get 150k off that? He also does regular freelance work, so income is closer to 33k. We are looking for about 50% LTV as we have saved a significant deposit and are receiving the rest from parents. We can easily afford the repayments on 150K even without my income as we live quite frugally and work locally. At the moment all my salary goes into savings.

I guess my question is how do I best demonstrate that we can afford repayments if they won't take my salary into consideration? Will the fact that the LTV is so low help our cause? I'd hate to pay the fees only to find out that we can't get the mortgage.

TIA

The_J

Maybe, your low LTV will certainly help. I would advise speaking to a broker. Things like Child Benefit and Tax Credits can be accomodated.

Oh, and prepare your flame shield from the usual morons on this forum who think 5x income is too much.

Simon_gloster

If you have proof via the inland revenue of what you declared taxable income over the last two years, this can be used. The same principle will apply to your husbands freelance work.

Based on his basic income, you wont get 5 x salary with 2 children. £33k pa this tax year will mean no tax credits. If his £33k stacks up, the low LTV will maybe help you towards the magic 5 x income.

How long have you been self emp and how much tax did your husband declare last year as this is crucial.

Simon_gloster

Oh, and prepare your flame shield from the usual morons on this forum who think 5x income is too much.[/QUOTE]

Let me have a go J!!!!!!!! I've been called worse on this forum.......basic 30k is pushing it in my opinion. Need more info.

wendybird

The_J wrote: »

Maybe, your low LTV will certainly help. I would advise speaking to a broker. Things like Child Benefit and Tax Credits can be accomodated.

Oh, and prepare your flame shield from the usual morons on this forum who think 5x income is too much.

Ah yes. I would generally be one of those people saying 5x is too much. House prices in this country are totally out of control and out of line with incomes. However, circumstances are such that we would really prefer to buy a house to raise our children in and mortgage will be significantly less than rent in this area. Thank you for your advice.

betmunch

Also its worth noting (assuming your business is providing an income) its not 5 times your income, its 5 times what a lender will consider as your income

wendybird

Simon_gloster wrote: »

If you have proof via the inland revenue of what you declared taxable income over the last two years, this can be used. The same principle will apply to your husbands freelance work.

Based on his basic income, you wont get 5 x salary with 2 children. £33k pa this tax year will mean no tax credits. If his £33k stacks up, the low LTV will maybe help you towards the magic 5 x income.

How long have you been self emp and how much tax did your husband declare last year as this is crucial.

Sorry, I really didn't give enough information. DH is not self-employed, his basic salary is 30k, but he does freelance on the side and the freelance does top his income up to £33k last year and on track for that this year as well (easily). He doesn't claim any expenses on the freelance, so pays as much tax as he would if it was PAYE (in fact a lot of the work does go through PAYE from his company - he does freelance for other departments). I have gone self-employed - started last November after maternity leave (received only maternity allowance). I don't have a full tax years accounts alas, but am bringing in just under £1k / month. We have no childcare or commuting costs. We have no debt, do not use credit cards and have clear credit histories. I am not on the electoral roll as I am a foreign national. We put money into savings every month, so can evidence a history of living within our means. We truly can afford repayments on 150k.

wendybird

betmunch wrote: »

Also its worth noting (assuming your business is providing an income) its not 5 times your income, its 5 times what a lender will consider as your income

This is a major problem if my income were being assessed, as a childminder I get very good tax breaks on regular outgoings (rent, utilities, council tax, toys and resources, car usage, etc) so my post-expense profit is very little. We clearly weren't thinking of future mortgage applications when I decided to do that rather than return to work and pay someone else to look after the kids :rotfl:

wendybird

We don't get any tax credits, but do get the £139 child benefit.

Simon_gloster

Thanks for the extra info.

Be mindful of your wording....you bring in just under £1k pm, what you declare tax on in the future is what lenders will use.

At present your trading period is short, therefore a large proportion of lenders will discount your income.

Based on £33k pa with child benefit, £34k, go onto lenders borrowing calculators if you have time tonight.

Personally I think 150k is too high, but as you say if you dont need that much, dont borrow it.

A common theme we see is borrowers saying they can afford it.........those who lend determine if you can afford it on their terms.

wendybird

Simon_gloster wrote: »

A common theme we see is borrowers saying they can afford it.........those who lend determine if you can afford it on their terms.

Ha ha! Yes, this is what I'm concerned about. Ideally we'd be buying in 2 years time after we had all the paperwork in place. Alas, circumstances beyond our control have forced our hand. If we have to go into another rental we will be paying more than the mortgage on a 150K loan. Ok if we have to, but would prefer not to move about any more if we can swing it.