Self-Employed Mortgage Help

uclown2002

Friend is self-employed and looking for maximum mortgage to borrow.

Any lenders particularly attractive for self employed people?

How much do they typically lend.

She is getting conflicting info from mortgage broker, who doesn't seem very useful.

Thrugelmir

who doesn't seem very useful.

Brokers aren't magicians by trade.

Post some further details this will enable people to comment.

kingstreet

Take average of three years' net profit. Deduct the annual value of any credit commitments and 5% of any credit card balances. Make an allowance for dependents and childcare costs, then multiply what you have left by about 4.5. That should give you a decent maximum borrowing figure. Add to that any deposit and you have a maximum purchase price.

Alternatively, once you have that three year net profit average, input that into a lender's online calculator with the other information and see what you get that way;-

http://www.nationwide-intermediary.co.uk/calculators/aff_calc

Nationwide's, for example.

_Andy_

"How much do they typically lend."

Why not just post the relevant figures so people can comment?

What are people supposed to put, "123,500"?

gazter

uclown2002 wrote: »

Friend is self-employed and looking for maximum mortgage to borrow.

Any lenders particularly attractive for self employed people?

How much do they typically lend.

She is getting conflicting info from mortgage broker, who doesn't seem very useful.

It depends on how many years accounts she has. One year, almost impossible, two year options open, three years, pretty much all mainstream lenders are fine.

The difference is how they calculate the multiplier. For instance. HSBC use a 4.75 x joint income maximum multiplier. But, they define your self employed income as your last three years of net profits added and then divided by three.

For example, you made £5,000 in 2010, £10,000 in 2011, £25,000 in 2012, it would come out as 5+10+25= £40 / 3, = £13,333.

It is more common however for a bank to take an average of your last two years. In this case this would result £17,500, or if your profits are year on year growth, some will take it on this years profits.
So, bank 1 = £13,300
bank 2 = £17,500
bank 3 = £25,000

All this makes a dramatic difference to your lending ability, and the only reason i decided to not retake my mortgage with hsbc.

uclown2002

Thanks for the 2 very helpful responses. I posted in a bit of a rush so assumed that peeps would realise what I was seeking but could have phrased my questions better.

PGGO

Hi, My partner works as a contractor and runs a ltd co. She is the only employee and takes a salary of around £7k, expenses of around the same amount, which covers fuel, which she generally makes a good profit from. She then takes a dividend of around £30k, annually. She has just posted her first set of accounts and turned over £72k in her first year. She should make a similar amount this year and has never been out of work. I wonder how lenders tend to view this, in terms of what they will lend and if any lender looks more favorably on this than others. This would be a joint ap with myself btw. Any advice gratefully received, thank you!

ACG

PGGO: It is possible to get a Mortgage with 1 years accounts or 1 years and a projection, but you would need a broker for this.

Uclown: I would just average out the accounts and multiply by 4, this will give you a rough idea as to what can be borrowed. It doesnt take into account debts, dependents etc etc but it gets you in the area. If your not happy with your broker find another - there are plenty around, just avoid the ones in the estate agents.