Self Employment Mortgage and Exaggerated income

liamb2001

Hi guys, could really do with a bit of help here. Me and my wife have been renting for years now and last night we had a couple of friends around and was talking about getting a mortgage.

My wife has had solid employment and good credit and has done for a few years now, but im self employed 2 years ago i was making good money but over the last 2 years my income has been dire to say the least untill the last couple of months where its starting to pick up again...so for me it was pretty straight we couldnt get a decent mortgage.

To my suprise my friend whos also self employed turned to me and said "thats BS, just lie, you know what you can afford". At first i thought he was joking and said to him surely they can do checks on your finances, want bank statments, accounts etc to which he replied "They cant see your bank, and you can fake your accounts, everyone else does, if it means getting lower interest rate!"

Basically suggesting i was of a minority because i was honest and that because of this id never get a decent mortgage, because he knows i would rather wait till i had 3 years of good (genunine) accounts before applying again.

this left me a little shocked to say the least, and it did get into a heated disbute where i was arguning back saying this was ridiculous and it wouldnt work nowadays but obviously i was compleltey unbacked on facts so i thought id come online to ask, now im not asking for peoples opinions on the morality of this, in all honesty im too chicken sh** to do this myself (even a bit) but i didnt have the facts to argue against him so i thought id look into this online.

He did get his mortgage a few years ago and i said im sure things would have changed since then but thought i'd ask about online.

When applying for a mortgage do they check your bank accounts ?

Surely this would be a huge risk of fraud ?

Am i neive, Is it the norm to exaggerate income in order to get a better mortgage ?

would really appreciate some info on this

[Deleted User]

There's no "risk of fraud", it is flat out fraud and people can get in a lot of trouble if they're caught (anywhere from mortgages being revoked to prison) although it depends on the extent. A call to action fraud could be bad news for your friend.

For most people exaggerating income wouldn't make much sense, as affordability is tied to the amount that you earn so taking a £500,000 mortgage on a £50,000 salary would be unaffordable.

kingstreet

There are no longer "self-certification" mortgages.

Whatever income you put on your application will be verified. Lenders normally ask for SA302s from HMRC now, not accounts.

Brokers and lenders now match up payslips and SA302s to bank statements to ensure the income declared is what is actually being paid into your account.

If you make an application, your income goes on the National Hunter system. If you then apply elsewhere, the next lender sees the income you disclosed on the first application and any alteration can see you flagged as making potentially fraudulent applications, resulting in increased scrutiny.

As many lenders will take your latest year's SA302 alone if it is better than the earlier years' and your partner has an income, you may be able to borrow more than you think. Why not talk to a good whole market broker and try to see what you can get without being deceptive?

ACG

I think Kingstreet has basically covered it, but just to add:
A few years back you could do what were called Self Cert mortgages, you basically put down what you want as your income and it was very rarely questioned as lenders assumed you would not be putting down more than you could afford.

That train has well and truly stopped, lenders now a days have to be able to evidence you can afford the mortgage - if the FCA (Formally the FSA) came in and picked up a file and that could not evidenced the lender would be getting their wrists slapped.

As your friend already has a mortgage it could be that he is being offered retention deals by that particular lender, but if he has no accounts or the accounts do not support the mortgage he will not be swapping and changing lender - ask him when he last changed and what he intends to do when his deal finishes (assuming he is not on the lenders standard rate).

Going forward, it is possible to get a mortgage on just 1 or 2 years accounts - depending on the size of the deposit. It is also possible to get a mortgage based on the rent you have been paying now. For example if the rent you have been paying is £750, the lender could work out how much you can borrow based on repayments of £750 and potentially lend you that. You would need a broker for that particular lender though.

wabbitpoo

As above - am just going thru this now. Both self employed, both showing almost no profits and low salaries (thanks to accountants) but now it comes back to bite, as having to jump thru hoops to get a small BTL mortgage. Even as we were in the midst of applying, their criteria changed and we fell foul of the tightened restrictions. Still hoping the broker can pursuade them to budge, else we will have to cash in all savings and pay cash!

ACG

A BTL is easier to get assuming you are a homeowner. Some lenders have no minimum income requirements on BTLs.

I find it hard to understand how a broker would struggle to get it through based on that alone.

kingstreet

wabbitpoo wrote: »

now it comes back to bite, as having to jump thru hoops to get a small BTL mortgage

Are you buying a property to let, or for you and/or a relative to live in?

Pixie5740

I had this same argument with a colleague a few months ago as we are both self-employed contractors. I kept trying to point out that borrowing money isn't as easy as it was when he got his self-cert mortgage some years ago. Lying and borrowing more than you can afford to pay back is a risk I wouldn't be prepared to take either.

tBagpuss_2

I have recently applied for a mortgage. As a partner in a business I am self employed - I was asked for a certificate from my accountant showing last three years income taken from our accounts.

And giving false information is mortgage fraud.

liamb2001

thanks for the amount of comments guys and kingstreet that was exactly what i was looking for.

Im wanting to buy to live in it Kingsteet

Its good to have things to back myself up when it arises again and i know it will lol, i said theyd have to be stupid not to do background checks and check your submitted incomes (self employed or not)

Im 36 now and realise its more of a case of now or never for a mortgage because 25 years is going to put me near the retirement age and i know that itself is bound to put me at a higher risk.

Thats good to know ACG need 1-2 good solid years of income, we have been renting a house now for £550 a month for 5 years and not missed a payment once. I was saying that would be a good idea if they took that into consideration, thats really good to know and fills me with more faith

TBagPuss, ive always done my own accounts so not sure how id provide this certificate, this year though i may go through an accountant.


I take it even overdoing things such as not putting down all my expenditure would help then ? Im wondering instead of putting down fuel, telephone bills etc that i used in the business (pay it out of my own pocket sort of thing) will that help ?