Mortgage virgin. Advice please :-)

BPDDC01

Hi All,

So at the moment I am running a sole trading company. I "could" take £1500 to £2000 PCM if I wanted to however the company needs to pay for other things and my partner is on benefits and so it would affect that. We are in the process of splitting up and leaving the home as I am not prepared to have a higher wage and therefore have to pay for everything when we are splitting up. This may sound selfish but he is responsible for his half and we will be going our separate ways soon. I do not want to be struggling for him.

Anyway, I want and need to take the company limited in a few months time. It is about to greatly improve and so will my situation. I will be putting myself on the PAYE, meaning I can put myself on a decent wage, regardless of if I decide to take it all or not, it will go through me that way.

I would like to get on the property ladder by Jan 2014, if not a bit earlier. I would have approx a 20k deposit on a 160k home and would need a mortgage on the rest. I am wondering if earning 2k PCM with low outgoings and a 20k deposit would satisfy some lenders, considering I am a first time buyer and would be the only one on the mortgage.

Lastly, if I decide to go to university this year, someone else will become director of the company (the person who will manage my business while I am at uni) but I will still be paid £1500/£2000 PCM for the little time I will remain working at the business. Would being a student affect me, even if I am earning 1500/2000 PCM still? With someone else being the director, I can and will have a working contract for minimum of 3 years to show that I will remain working for that company.

Oh, never had bad credit, although only had a couple of credit cards to date and I should mention I am 21 this year. Have been paying a commercial rental contract for last 2 years of 10.5k Per year.

Thanks everyone!

kingstreet

You'll be classed as self-employed by a lender, whether you are a limited company, or a sole trader.

You'll normally need two or more years income evidence, such as accounts or SA302s and lenders normally take net profit, with drawings/salary added back in.

ACG

This is going to be pretty tight. There may be a way of doing it but i wouldnt hold my breath.

I think you need to reduce the purchase price by around £20k to make this much more likely.

Edit, just following on from Kingstreet... I am presuming you already have some self assessments, it could be worth holding fire with going ltd until you have the accounts - although i dont think thats the biggest problem you will have.

Crashandburn

The initial problem I can see with what you are trying to do is that lenders wish to see a consistency in the income. You mentioned that you have not been taking a higher wage from the business and therefore this will reflect in your tax returns which is usually the document lenders base their decision on.

Some lenders are funny about you changing from being a sole trader into a limited company but most would recognise this as a step forward for the business and as long as you can show the income for when you are a sole trader and that it is a limited company with no other partners, then this would be the smallest of hurdles to overcome.

As for buying a property in January 2014, it would seem you are requiring a mortgage of £140,000 but if you are taking £24,000 per annum out of the business, then it would need a lender who would allow you to use this income and any other retained profits within the business to get even close to the figure required. I would say that the fact you have a history of showing lower incomes from the business, then it will be very difficult for someone at the start of next year to base their decision just off 10 months of increased money.

First port of call may be to clarify what income figures you have declared for the last couple of years by way of your tax returns and then maybe arrange to see a broker to run through your options and to see how close to the £160,000 home you can get.

As for the last question regarding the University, then the lender would question why you are buying a residential home when indeed you've gone off elsewhere to university. Nothing wrong with you buying a property in the university town and indeed using your business income to support the mortgage request but again on the basis that you can show a consistent history of earning money from this source.