Self-employed - proving my income

Parallel_Universe

I wonder if anyone could advise me please? I'm self-employed and am increasing my current mortgage along with my Husband (who is employed), due to selling our house to purchase a larger and more expensive one.

The mortgage lender has asked me for proof of my earnings, however as I am a sole trader and have a simple business (personal training) with very few transactions I do my accounts and tax return myself. My first return showed a loss due to start up costs, equipment etc (although I did of course make money!) and my second tax return shows a small profit which was covered by my personal allowance. My actual takings were a lot more though but due to expenses the overall profit figure was low. I am worried I will not be able to back up the amount I actually earn with sufficeint evidence.

Will they accept a letter from my business self-certifying my earnings?

We are by no means borrowing at the top of our capacity (borrowing £209k, they are prepared to lend us £292k). Mine and my Husbands earnings account for roughly 45%/55% respectively for the purpose of the mortgage application.

financial_solution

Hi parallel universe,

It depends on who the lender is. This really should have been checked prior to application.

Some lenders are mor flexible on lower loan to value applications.

Who is lender?
What is the value of the property?
how much are you borrowing?

Good luck,

regards,

mark

Parallel_Universe

Hi Mark

The lender is Coventry BS, value of property is £249,950 and we are borrowing £209,000.

Thanks very much

dunstonh

My actual takings were a lot more though but due to expenses the overall profit figure was low. I am worried I will not be able to back up the amount I actually earn with sufficeint evidence.

Your takings is not your income. That is your turnover. Lenders are not interested in your turnover but your income as that is the true reflection.

So, the tax return figures are the one's which the lender will use in making their decision.

Strangled

Take your statement the IR send you saying they accept your figures etc.I get one each year.......but saying that not as yet this year....oh dear ;-)

Parallel_Universe

Strangled wrote: »

Take your statement the IR send you saying they accept your figures etc.I get one each year.......but saying that not as yet this year....oh dear ;-)

I have never had one of those :eek:

JoeK_3

financial_solution wrote: »

HI parallel Universe,

Dont know much about Coventry BS. How far have you advanced with application, have you had valuation etc done?

I do have available gwnuine self-cert without requirement for back-up to the 85% loan to value you require?

let me know if you want more info (No commitment).

Good Luck.

Regards,

Mark.

I say! Is that an approach???

JoeK

silvercar

JoeK wrote: »

I say! Is that an approach???

JoeK

Most of FS's posts are. also without any signature......

Coventry lending rules:

admissable income income multiplier (based on mian income only)

upto £20k 3.6
20-35k 4.0
35k+ 4.3

for self employed, 2 years trading, annual income is last years net profit before tax.

Proof needs to be last years accounts or self assessment return. If accounts have not been prepared by a qualified accountant you need to show last 6 months business bank statements.

hopeless_case_2

well i have a selfcert mortgage with the halifax at 5.75% fixed for 2 years and did not need to show any proof of income.

Parallel_Universe

financial_solution wrote: »

HI parallel Universe,

Dont know much about Coventry BS. How far have you advanced with application, have you had valuation etc done?

I do have available gwnuine self-cert without requirement for back-up to the 85% loan to value you require?

let me know if you want more info (No commitment).

Good Luck.

Regards,

Mark.

Valuation hasn't taken place yet so I have a little time to mull it over...

HelpWhereIcan

Coventry will sometimes use the most recent year's figures - especially where there has been a growth in profits - but you will need to have some prior experience in the industry either as employed or self employed.

However, as dunstonh has said they will only use the net profit figure (turnover less expenses) as that is your taxable income. In theory everything else is used to keep the business afloat and not for your personal expenditure.

It may pay for you to get an accountant so they can prepare a projection for this year's income that the Cov may well use (especially if your income is growing), but this will depend on how far into your financial year you are.

Self cert could be an option, but remember that it only allows you to declare income that you have but can't prove and the figure you are meant to declare is the net profit figure. eg in the case of your income increasing significantly this year but books have not yet been prepared to show the increase.

hopeless_case wrote: »

well i have a selfcert mortgage with the halifax at 5.75% fixed for 2 years and did not need to show any proof of income.

Halifax do not provide self cert mortgages - they do fast track underwriting which is a different matter. However, fast track can have the same effect for people with a decent credit score and some equity.

Again, it does not allow you to declare income that you don't have. But this time it does not allow you to declare income you cannot prove either - they always reserve the right to ask for proof of income and are more likley to request that proof than a self cert lender.

I know of one lender who offers fast track but will automatically ask for proof of income etc if the customer does not declare every credit commitment accurately on the application form (forget about one store card with a balance of £50 and they will ask for proof of your income).

Be careful of being persuaded to abuse the system. It is your credit profile and criminal record that is being put at risk.