Can I get a mortgage ?

Sheila69

I was off radar for a few years as I lived abroad and then wasn't working or earning but I have been back and on the electoral roll for the last 4 years, moving once 3 years ago.

The trouble is that I don't have a credit profile as such. I only have a debit card with my bank, no credit cards, no mobile phone contracts, no debt etc.

I've recently picked up a new contract for around £15k a month. A lot of money I know but I'd like to best position myself to get a mortgage in the near future as I can. I have the option to go through my own Ltd company or be paid PAYE.

If I go through a Ltd company, I won't have accounts for ages but is that a problem ?

If I go PAYE, after how long would I be considered a decent risk for a circa £500k mortgage at around 75% LTV ?

I've read about the benefits of getting a credit card and paying it off etc. but does that really help in my situation ?

thanks

Yorkie1

Lenders like to see a history of managing credit responsibly.

So I would say yes, do get a credit card and use it for regular purchases, and make sure you pay it off every month in full - set up a direct debit to do so.

The days of self-certification for mortgages are long-gone, so as a general rule lenders want to see accounts for a year or more if not an employee. However, I don't know enough to comment specifically on your situation and hope the others will be along at some point to offer their thoughts.

ACG

Can i just dig a bit deeper into your employment...

Are you basically self employed, but debating putting yourself as a ltd company in order to pay yourself paye? If thats the case that will not help. If however you have been self employed for a year minimum already, in theory its possible to get a mortgage with just one years accounts - maximum i know of is 80% LTV.

If you can expand on your employment we might be able to help further.

Sheila69

ACG wrote: »

Can i just dig a bit deeper into your employment...

Are you basically self employed, but debating putting yourself as a ltd company in order to pay yourself paye? If thats the case that will not help. If however you have been self employed for a year minimum already, in theory its possible to get a mortgage with just one years accounts - maximum i know of is 80% LTV.

If you can expand on your employment we might be able to help further.

I haven't been self employed at all so far and I have no accounts from any company.

If I do not go PAYE, then I will put it through a new Ltd Co. but I know that angle doesn't work well as you need to avoid claiming expenses in order to boost profits and thus pay tax you need not have paid simply to get a net profit figure higher than it would have been purely to get a mortgage based on that amount. However, contractor mortgages would be on the table.

However, going PAYE means giving up huge amounts of tax which could otherwise be directed into a pension. However, if it is structured at the beginning of a tax year, a change after obtaining the mortgage from PAYE to Ltd would see a rebate of tax paid which could be directed into a pension.

fiesta04

See an IFA who deals in all areas you need, it could be the best £150-200 you could spend.

F4

Sheila69

fiesta04 wrote: »

See an IFA who deals in all areas you need, it could be the best £150-200 you could spend.

F4

Yes, you are right but the potential complexity and pushing of the envelope will mean a good few hours searching for someone who can roadmap from where to are to what we need to achieve.

afly

Just to relate my personal experience with this. I'm guessing you're weighing up paying yourself up to the LEL as a director and then dividends as a shareholder so as to incur no tax (though the company will pay 21% corp tax). Few things I've found....


The banks will largely lump you under the self employed category

3 years seems to be the magic number for self employment for a lot of things. Once you pass this marker things get a lot easier.

The banks are aware of this income strategy but they will often analyse it aggressively. e.g nationwide want 2 years signed off accounts (salary + dividends). They will take the average of the 2 years OR the most recent year if it is lower

Because you pay no tax, your gross and net income figures are the same. So when you put 20k down as your income, that was also your take home. When a PAYE'r puts down 20k, their take home would of been more like 16k with the tax deductions. The bank do not care about this and will assess you both the same way. That is a downside to "income minimisation"

This income strategy only works up to around 40k at which point you will start paying tax on either your salary or dividends. So bare that in mind. Also cost up an accountant. You may find the overheads of running a ltd company negate the tax saved.

As another consideration, you'll want to know if the service provided is vattable. If it is, you'll have to charge your client 20% VAT which they may not be agreeable about

PAYE is the safer short term strategy I would say. If long term is an option (I mean years) then self employment/ltd comp may be more appealing

ACG

If your ltd company is new and has no accounts - that is out of the question.
If your ltd company is new and your putting yourself as a PAYE employee just to get 3 months payslips - again, that is out of the question as you are still seen as being self employed as you are the business owner.
I do know of private lending firms who will basically offer the money you need upto 65% LTV without asking too many questions but the interest rates are double figures and that will probably not work for you in this instance.

I still think you need to sit down with someone and get everything down and let them do the research to find a way to get it to work. Based on your last post i think this could be very difficult and far too complex to discuss with any accuracy on an open forum. Your time would be better spent finding a broker... im not sure this is one for an IFA, i think you need a very good mortgage broker who has the time needed to research this properly.

Sheila69

ACG wrote: »

If your ltd company is new and has no accounts - that is out of the question.
If your ltd company is new and your putting yourself as a PAYE employee just to get 3 months payslips - again, that is out of the question as you are still seen as being self employed as you are the business owner.
I do know of private lending firms who will basically offer the money you need upto 65% LTV without asking too many questions but the interest rates are double figures and that will probably not work for you in this instance.

I still think you need to sit down with someone and get everything down and let them do the research to find a way to get it to work. Based on your last post i think this could be very difficult and far too complex to discuss with any accuracy on an open forum. Your time would be better spent finding a broker... im not sure this is one for an IFA, i think you need a very good mortgage broker who has the time needed to research this properly.

I could as you suggest factor things through my own Ltd as a contractor but in the short term, there is no viable option going down this route which leads to a mortgage. I could also be paid offshore, have earnings flipped into various derivatives and paid out in any jurisdiction etc. but none of these exotic options will stand up to mortgage application scrutiny.

My gut feeling is that your suggestion to deal with a specialist is correct. Pushing the envelope to achieve the end goal in a short time frame is going to be outside the bread and butter mortgage stuff IFAs are used to dealing with.

Finding one however is going to be a hard task I suppose ?