Self-employed mortgage - low LTV

edinstead

Hello everyone

I have been self-employed for about 2 years but the first accounts in 2010/11 were a training period with a loss of £6,000, the next accounts were a partial trading year with a profit of £10,000 and this year I am on target for a profit of £25,000+ and growing steadily.

My wife also has a part-time job for £12,000 (plus some overtime).

We have £350,000 for a deposit and are hoping to get a mortgage of about £150,000. We can pay off the few debts that we have without affecting our deposit and we have no problems that we know of with our credit histories.

I have been spending time researching self-employed mortgages and lenders' criteria, as well as contacting a couple of mortgage brokers but apart from one broker saying that we have a chance of a mortgage if we pay high fees to them (£1,300++) and another saying that we could get a mortgage on a much higher interest rate (5%) I am having real trouble finding out which lenders would be prepared to consider our case.

I am trying to avoid spending more fruitless hours speaking to people and would be very grateful if anyone could share their thoughts about which lenders to approach directly in my situation. I know that we will probably need to wait until after the end of the tax year to be approved for a decent mortgage but ideally I would like to be agreed in principle so that we can start househunting properly as soon as possible and the submit the accounts in early April.

Thank you for your help

Ed

ACG

Will the broker only charge you a fee if he can secure you the mortgage?
I charge a fee, but i refund it if the mortgage doesnt go ahead.

Advisors are reluctant to tell you who the lender is, theyve done the work and worried you might just go off and go direct.

What your after probably isnt the easiest of cases to place.

Thrugelmir

edinstead wrote: »

We can pay off the few debts that we have without affecting our deposit

What do you define as a "few" debts?

As this may well impact your credit history.

GMS

Do you have an accountant? What would you estimate the profit to be for year 2012-13?

Broker would be useful. Obviously agree any fees up fromt and if you are not happy then find another broker.

edinstead

Thanks ACG. The broker with the high fee breaks it into 2 parts as far as I understand it - about £500 to get an agreement in principle (which is refundable if he fails to get this agreement in principle but there appears to be no guarantee that I will like the terms of the proposed mortgage) and then the other £800 if I choose to proceed with the mortgage and I think that this is only payable once the mortgage is agreed.

I can understand why a broker would not want to give the name of their proposed lender but I think that asking for £1,300 for something that I could easily do myself (unless of course it is a lender who does not sell direct to consumers) is pretty steep. This was just based on a 10-minute conversation and no actual enquiries have been made by the broker so I would rather find a less opaque and more affordable solution if possible.

edinstead

Thrugelmir, currently about £3,000 on an interest free credit card and about £9,000 in a personal loan that we plan to pay off over the next couple of months in full.

edinstead

GMS, I have done all my own accounts so far although I know quite a few accountants who can help me with doing the accounts and providing a projection. I am currently earning about £3,000 a month profit for the last 4 months so I would hope to earn £36,000+ in the next tax year.

I am happy to use a broker if required but I want to make sure that they are getting the best deal for me (rather than themselves) and that it is not something that I could have arranged myself with a phone call straight to a lender.

GMS

£500 to get a DIP is steep to say the least.

The problem you have is your earnings are too low for most lenders. You need to find a lender who will take a view on the rising and projected profits.

As said a broker will be useful but the fees tructure needs to be agreed up front.

ACG

edinstead wrote: »

but I think that asking for £1,300 for something that I could easily do myself (unless of course it is a lender who does not sell direct to consumers) is pretty steep.

Your paying for the fact someone can do this for you - not just find you the deal but do all the work around it. If your not happy you still have the option to go and do the research yourself.

Personally i can see your point, i would be reluctant to spend anything until i knew it was a rate i was happy with. The broker presumably would come back to you, tell you about the deal (ie rates and fees) if your happy you then pay him his fee to get the application?

Discuss this with your broker, tell them your not happy with the charging structure. Im sure your broker would prefer to change his structure and still get paid than lose you as a client.

edinstead

Thanks GMS. The million dollar question seems to be who the lender is that would be willing to take into account the rising profits as well as the fact that I have a very healthy deposit compared to mortgage requirement.

If anyone is willing to name a lender or 2 that might be right then this would be very helpful but failing this I will have to start making some more calls to brokers and lenders I guess.

GMS

Naming lenders without knowing your full circumstances will not happen from an adviser. Random naming of lenders is dangerous. The 'I am in the same situation and I got a mortgage from xxxxxxxxx' is all well and good but if ot costs fees to be declined because you are slightly different then it is unhelpful.

In your favour is your deposit. Against you is the income you can prove.

Solution may well be there but a broker would most likely be needed.

Not trying to be vague or evasive. Wouldn't want to give false hope/costly tips