Mortgage trouble - sole trader

catyxx

Hello,

I was after a bit of advice and would be so grateful for any thoughts.

I am self employed and am looking at getting a mortgage of £275k (new property is worth £425k). I have £150k equity from my current property but have been turned down for the full £275k from HSBC (they only offered £240k). They have been absolutely useless and made us change solicitor and also did not advise us they needed net profit figures. They have wasted 3 weeks of our time.

I did not know that they work out what you can borrow from your Net profit - My gross is approximately £70k a year but the net around £50k and this is apparently not enough for a £275k mortgage.

Does anyone have any advice on where to try next?

Thank you

Caty B

Let_Us_See

Gross profit is a meaningless figure and certainly unacceptable for assessing affordability. Forget gross and net for a moment and consider your tax returns - what declared income will your SA302s confirm?

catyxx

Thanks for the response Let us see - I'm now getting my SA302s from HM Revenue as HSBC didn't ask for this info.

kingstreet

Gross and net are not the same for an employee as they are for the self-employed, so if you are thinking it's gross income, less tax and NI, that's incorrect.

IIRC box 30 on your SA return shows - your turnover (box 8), less allowable expenses (box 19) but before the deduction of your personal allowance, or tax/NI. That is the net profit used by lenders.

As LUS has said, obtain your last three years' SA302s from HMRC. They will fax them to a chosen number, useful if you have a whole market broker on hand to establish what you can borrow!

koexelek

Let_Us_See wrote: »

Gross profit is a meaningless figure and certainly unacceptable for assessing affordability. Forget gross and net for a moment and consider your tax returns - what declared income will your SA302s confirm?

The self employed need to think carefully about how they srtucture their accounts these days
If you don't need to borrow any money, it's fine to write off as many expenses as possible and keep the figure you pay tax on low.
However, if you are going to need to borrow money, it's worth declaring less expenditure in order to make the net profit higher.
i.e. taking a bit of a hit on the tax, to be able to borrow what you need.
The biggest beneficiary of the banning of self cert mortgages is the Inland Revenue.
In the old days, the self employed could pay minimal tax, do a bit of cash in hand :eek: and still get the mortgages they wanted... where as these days, if you are not paying tax on it, it isn't income as far as a lender is concerned.

Thrugelmir

koexelek wrote: »

In the old days, the self employed could pay minimal tax, do a bit of cash in hand

Even in days gone by many tried and failed. As deception with large sums is harder than one imagines. The HMRC have powers to challenge and assess unilaterally. Seem many fall foul over the years. Trying to be to clever. As there's no time limit to backdating and no appeal either.